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S. HRG. 112–837 

SMALL BUSINESS RECOVERY: PROGRESS REPORT 

ON SMALL BUSINESS JOBS ACT OF 2010 

IMPLEMENTATION 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MAY 19, 2011 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED TWELFTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOHN F. KERRY, Massachusetts 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY R. HAGAN, North Carolina 

DAVID VITTER, Louisiana 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

KELLY AYOTTE, New Hampshire 

MICHAEL B. ENZI, Wyoming 

SCOTT P. BROWN, Massachusetts 

JERRY MORAN, Kansas 

DONALD R. CRAVINS, JR., Democratic Staff Director and Chief Counsel 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

Snowe, Hon. Olympia J., Ranking Member, and a U.S. Senator from Maine .... 13 

Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire ............................ 18 

WITNESSES

Panel 1 

Johns, Hon. Marie, Deputy Administrator, U.S. Small Business Administration ........................................................................................................................ 18

Graves, Don, Deputy Assistant Secretary, Small Business, Community Development, and Housing Policy, U.S. Department of the Treasury ...................... 23 

Panel 2 

Blinderman, Eric H., Co-Owner, Mas (Farmhouse) Restaurant .......................... 64 

Arslan, Kristie L., Executive Director, National Association for the Self-Employed .................................................................................................................... 71 

Woodie, Patrick N., Vice President, Rural Delelopment Programs, North Carolina Rural Economic Development Center, Inc. ................................................. 80 

ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Arslan, Kristie L. 

Testimony .......................................................................................................... 71 

Prepared statement .......................................................................................... 74 

Blinderman, Eric H. 

Testimony .......................................................................................................... 64 

Prepared statement .......................................................................................... 67 

Graves, Don 

Testimony .......................................................................................................... 23 

Prepared statement .......................................................................................... 26 

Johns, Hon. Marie 

Testimony .......................................................................................................... 18 

Prepared statement .......................................................................................... 21 

Johnson, Alex and van Hook, Brian 

‘‘Progress Reprot: SBA Requirements in the Small Business Jobs Act 

of 2010’’ .......................................................................................................... 113 

Landrieu, Hon. Mary L. 

Testimony .......................................................................................................... 1 

Prepared statement .......................................................................................... 5 

Vistage Confidence Index Data ....................................................................... 33 

Vistage Confidence Index Data Q1 2010 ........................................................ 39, 

47, 96 

‘‘The Small Business Jobs Act of 2010 (PL 111–240): A Progress Report 

of SBA’s Requirements’’ ................................................................................ 47 

‘‘Small Business Jobs Act (SBJA) Success Stories’’ ....................................... 87 

Shaheen, Hon. Jeanne 

Testimony .......................................................................................................... 18 

Snowe, Hon. Olympia J. 

Testimony .......................................................................................................... 13 

Prepared statement .......................................................................................... 15 
Page

IV 

—Continued 

New York Times article titled ‘‘Why Won’t the S.B.A. Lend Directly 

to Small Businesses?’’ ................................................................................... 56 

State International Development Organizations 111 

Woodie, Patrick N. 

Testimony .......................................................................................................... 80 

Prepared statement .......................................................................................... 82 
(1) 

SMALL BUSINESS RECOVERY: PROGRESS 

REPORT ON SMALL BUSINESS JOBS ACT 

OF 2010 IMPLEMENTATION 

THURSDAY, MAY 19, 2011 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:04 a.m., in Room 

428A, Russell Senate Office Building, Hon. Mary L. Landrieu, 

Chair of the Committee, presiding. 

Present: Senators Landrieu, Cardin, Shaheen, and Snowe. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, 

AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Good morning, everyone. I would like to call our 

meeting to order, and I would like to thank all of our witnesses for 

joining us this morning, particularly our witnesses on this second 

panel who are going to be bringing real life testimony to the issues 

that we are looking at and reviewing. 

As many of you know, this week is National Small Business 

Week. President John F. Kennedy started this tradition in 1963 to 

recognize the contributions of small businesses to the economic vitality of our country. The following year, President Johnson awarded the first ‘‘Small Businessman of the Year’’—I underline the word 

‘‘Businessman of the Year’’—to a Mr. Berkley Bedell. 

Mr. Bedell was from Spirit Lake, Iowa. He was President of 

Berkley Company, a manufacturer of fishing lines. His business 

was started in a bedroom or a workshop while he was still in high 

school. At the time, President Johnson said that Mr. Bedell represented millions of American small businesses who, as Saint Paul 

wrote, were not slothful in business, but fervent in spirit.( That 

was from Romans 12:11. 

While times have changed since then, I believe it is still our responsibility as policymakers to lift up these entrepreneurs that are 

not slothful in business, but are fervent in spirit, and that is the 

purpose of today’s hearing. 

We want to recognize the 27.2 million small businesses in America that are struggling to recover from the great recession. More 

specifically, we will hear how our Federal Government, how our 

Federal Government is implementing the Small Business Jobs Act 

passed last year with the help of many members of this Committee. 
2 

This legislation has been touted as the single most important piece 

of legislation in decades for small business. 

Let me just mention a few other things, and then I will recognize 

Senator Shaheen who is here for her opening statement in just a 

moment. I want to put a few things into this record. 

Last Congress, the 111th Congress, the Committee heard compelling testimony from small business owners across the country 

struggling to keep their lights on, their doors open, and stretching 

to keep valuable employees on the payroll. 

Many business owners could not get conventional bank loans. 

Others saw substantial reductions in their existing lines of credit. 

Still others had cutting-edge products but did not see an opportunity to contract with the Federal Government. The results were 

alarming. 

Since 2008, small firms accounted for between 64 and 80 percent 

of net job losses in our country. That is beginning to reverse. We 

are excited about that, and we will hear more about that today. 

To address these issues, I am proud to have led Senate efforts 

to enact the Small Business Jobs Bill of 2010. The bill was signed 

into law by President Obama on September 27th. The Jobs Act provided many things: support to small businesses in many important 

ways, $12 billion in immediate tax relief, increasing access to capital by increasing SBA loan limits, establishing the Small Business 

Lending Fund, strengthening the core programs of the Small Business Administration which resulted in more money for counseling 

services for small business development centers, increased export 

opportunities, and a more level playing field for small businesses 

looking for opportunities to contract with the Federal Government. 

First, the Jobs Act included multiple small business tax cuts effective for 2010 that provided incentives for small businesses to 

make new investments in property and real estate and expand 

their operations. For example, small business owners who bought 

new equipment in 2010, the Jobs Act included enhanced expensing 

provisions that allowed the immediate write off of the first 

$500,000 of tangible personal property and up to $250,000 for certain investments in real estate. 

Also, for the first time ever, self-employed business owners could 

deduct 100 percent of the cost of health insurance for payroll tax 

purposes. In my home state of Louisiana alone, there are over 

234,000 self-employed individuals eligible for this tax break. All together, the bill included over $12 billion in tax cuts for small businesses at a time when they needed them the most. 

Next, the Jobs Act focused on the major hurdle limiting small 

business growth and that was the lack of access to capital. In particular, the Jobs Act continued vital programs from the American 

Recovery and Reinvestment Act which spurred lending to small 

businesses. It eliminated the borrower’s fees, increasing the Federal Government guarantee on SBA loans from 75 percent to 90 

percent. At the time our bill passed, these provisions had already 

supported $30 billion in lending to more than 70,000 businesses 

since 2009. The extension of these Recovery Act provisions in our 

bill allowed an additional 1,500 businesses to receive more than 

$750 million in loans. 
3 

The Act permanently raised the maximum loan size for SBA’s 

two largest programs, increasing the maximum 7(a) loan size from 

$2 million to $5 million and the maximum 504 loan size from $1.5 

million to $5.5 million. These were extraordinary accomplishments 

in this bill, and I am proud to have lead that effort. 

In addition, the Treasury Department was tasked with implementing two new programs designed to support private-sector lending to credit-worthy small business. The Small Business Lending 

Fund makes billions of dollars in capital available to roughly 7,000 

healthy community banks in our country. We will hear more about 

that today from Mr. Don Graves and from the Honorable Marie 

Johns. 

This strategic public-private partnership could leverage billions 

of dollars in additional lending to smaller firms. Treasury has already received applications from 700 banks for roughly $10 billion. 

That is encouraging. We are making progress. 

The Small Business Credit Initiative, which was pushed by several members of our Committee much to my joy, will support at 

least $15 billion in new lending by strengthening state small business programs. 

I know Senator Hagan is going to be particularly happy because 

there are some really wonderful opportunities that will be shared 

today from that part of the country. 

Under the Jobs Act, key enhancements were made to enhance 

and improve SBA programs. As we know, only 1 percent of small 

businesses export. With 95 percent of the world’s consumers outside of the United States, it is important that this Committee took 

the opportunity to strengthen our export programs. We are going 

to hear some testimony today about how that is working. 

Our bill improved SBA export financing programs by significantly increasing the maximum size of export loans and by expanding the network of SBA export finance specialists that counsel exporters and help them underwrite the loans. It created a State 

Trade and Export Program which will provide $60 million in grants 

to states to bolster bluster their programs. 

Let me say one other thing before closing. In addition to all of 

the things that I mentioned, this bill also increased enhancements 

to the small business contracting program. The Federal Government has over $500 billion a year available for purchases of goods 

and services, and we opened up opportunities for small business, 

woman-owned businesses, HUBZones, and service-disabled veterans to participate in that program. 

In closing, I just want to highlight a couple of provisions. I give 

you one example in closing of how this specifically worked for a 

business in Louisiana. 

Baker Sales of Slidell is a small business that operates in Louisiana. It has operated for many years. When the construction 

slump occurred and the recession began, it saw its sales drop by 

20 percent, and then again when the Deepwater Horizon explosion 

happened and the moratorium was put into effect, sales fell even 

lower. They have been in business for 30 years. They had imported 

steel products and sold them within a 200-mile range of Slidell. 

They wanted to export but it was simply a pipe dream. 
4 

Last March, however, they received assistance from the Regional 

Director of U.S. Commercial Service Staff in New Orleans to travel 

to Panama to identify potential clients. Baker Sales lacked the capital to make these investments. A local bank was not going to give 

them capital when the collateral and collections were in Panama. 

They could not enforce in the event that something went south on 

this. But with this new program, Baker Sales received $3 million 

from a 7(a) loan that helped them to secure the contracts in Panama, expand their export opportunities and give them a path forward out of what has been a very difficult economic time for them. 

They have hired two additional employees, and they expect to expand sales in the future. 

So today we will hear some additional success stories like Baker 

Sales in Slidell. I am proud of the work that this Committee has 

done and we are going to get some testimony from our key witnesses about what more we can do to improve the outlook for small 

businesses in America today. 

Let me turn it over to my ranking member, Senator Snowe, and 

then we will receive opening statements from Senator Shaheen as 

well. 

[The prepared statement of Senator Landrieu follows:] 
5 

Chair Mary L. Landrieu 

Opening Statement for September 22, 2011 

Roundtable entitled: 

"Closing the Wealth Gap: Utilizing Minority Owned Businesses as 

Vehicles for Job Creation and Economic Recovery" 

Prepared By: Donald Cravins & Krystal Brumfield 

Good morning and thank you for joining us for this very important 

roundtable. Let me first welcome all of you in the audience who are visiting 

Washington this week for the Congressional Black Caucus Events. I am pleased 

to be joined this morning by my colleague and friend, Senator Ben Cardin and 

some of my very distinguished colleagues from the House, Representatives 

Chaka Fattah, Yvette Clarke, and Cedric Richmond. 

I am very honored to be co-hosting this very important roundtable with 

these dynamic leaders. When my staff approached me about convening a 

roundtable during CBC Week like I did last year with Senator Roland Burris, I 

did not hesitate in choosing the topic for discussion. In my humble opinion, one 

of the most pressing issues facing the United States of America is the gross 

disparity in wealth that exists between white Americans and African-Americans. 

Since becoming the Chair of the Senate Small Business Committee, I, 

along with the other members of this committee, have made closing the wealth 
6 

gap a Committee priority. Notwithstanding our Committee's limited 

jurisdiction, we have done our part to tackle this issue by addressing the barriers 

that affect minority-owned small businesses. In some cases, those barriers are 

not unlike the barriers which plague all businesses. But, in some cases, the 

obstacles that minority small business owners face are very unique. Since 2009, 

I have convened at least 4 hearings or roundtables to address ways that the Small 

Business Committee and the SBA, through its many of programs, can both 

address and remedy the issues affecting minority-owned small businesses. We 

have given specific attention to the two very important issues that face AfricanAmerican small business owners: 1) limited access to capital and 2) limited 

access to government contracting. 

My staff updates me regularly on how many banks are making loans to 

small businesses and this Committee constantly looks for new ways to open up 

capital markets and increase contracting opportunities for small businesses. It's 

clear to me that African American business owners want reliable and nonpredatory financing opportunities. And they want to know that when the federal 

government does contract for goods and services, it does so by placing small 

2 
7 

businesses on a level playing field with big business - it's as simple as that. Last 

year, at a hearing of the Small Business Committee, Dr. Robert Fairlie, a 

professor of Economics at the University of California Santa Cruz, testified that 

of the many factors responsible for the disparities in business performance 

between minority and non-minority-owned businesses, access to financial capital 

is perhaps the most important. He pointed out that one of the major roots of the 

problem is the extremely high level of wealth inequality found between 

minorities and non-minorities. 

At that hearing, I was also astonished to learn that half of all AfricanAmerican families had less than $5,500 in total wealth and half of all Latino 

families had less than $8,000. Just recently, on July 26,2011, the renowned Pew 

Research Center released a Study entitled, "Wealth Gaps Rise to Record Highs 

Between Whites, Blacks and Hispanics." The findings of the Study are based in 

the Pew Research Center's analysis of data from the Survey of Income and 

Program Participation (SIPP), an economic questionnaire distributed periodically 

to tens ofthousands of households by the US Census Bureau. 
8 

Although we have the Senior Researcher from Pew here to testify in detail 

about the study, I do want to take a few minutes to highlight some of my 

observations from the Study. 

The Study shows that the median wealth of white households is nearly 20 

times that of black households and at least 15 times that of Hispanic households . 

...,.., ..... t __ t ___ --=:k 

••••• 

10_ 1-$0_ 1991 1$0"$>3 1995 

d 

3004 2009 

These lopsided wealth ratios are the largest since the government began 

publishing such data a quarter century ago and roughly twice the size of the 

ratios that had prevailed between these three groups for two decades prior to the 

Great Recession that ended in 2009. 

4 
9 

Media-N"l. Net 'V\fOs1::''f''t o~ ~"'<::.)uset~-ctlds .... 

2005 aifll:d 20'09-

in 2~ dollars 

------_._-------------

As a result of the burstirlg h"",~ir'''' ma.rket bubble in 2006 and the 

recession followed from 2007 to HIU1-""'V the black household 

in wealth i.n tbe 

household had white household had 

2009 

in 2009 dollars 

5 
10 

Blacks: The net worth of black households fell from $12,124 in 2005 to 

$5,677 in 2009, a decline of 53%. Black households drew a large share (59%) 

of their net worth from home equity in 2005. Thus, the housing downturn had a 

strong impact on their net worth. 

Whites: The drop in wealth of white households was modest in 

comparison, falling 16% from 134,992 in 2005 to $113,149 in 2009. Home 

equity accounts for relatively less of whites' total net worth (44% in 2005) and 

that served to lessen the impact of the housing bust. 

I have been in public office for over 30 years as a state legislator, a state 

treasurer and US Senator. I have known all my life that wealth and income 

disparities unfortunately exist in America among the various races. To say the 

very least, the widening of the wealth gap continues to shock and cause me great 

dismay. I have discussed it with my colleagues here in Washington, I have 

shared it with groups all over this country, and I have made it one of my 

missions to do all that I can to close the gaps and eventually eliminate these 

disparities. 

6 
11 

The purpose of today's roundtable is simple. We are here not only to 

discuss the wealth gap but to discuss solutions - solutions on how Congress 

along with our partners in the Administration, the academic community and the 

business community can close and eventually erase the wealth gap. I truly hope 

that our esteemed panelists will identify solutions that can be implemented by the 

Small Business Committee and by utilizing minority-owned small businesses. 

Our fIrst panel will consist of representatives from the Pew Research 

Center, the NAACP and Dr. Danny Boston who will discuss the wealth gap and 

the factors leading to the wealth disparities in this country. After we hear from 

them, the fIrst panel will continue and we will hear from our government 

offIcials who will recommend ways the government can provide solutions. 

We will hear from Deputy Administrator of the SBA, Ms. Marie Johns, our 

Chief Counsel for the SBA's OffIce of Advocacy, Dr. Winslow Sargeant and 

last, but not least, Mr. David Hinson, Director of the Minority Business 

Development Agency at the Department of Commerce 

On our second panel, we will hear from business experts from throughout 

our country on solutions and effective ways that, through minority business 

7 
12 

development, we can close and eventually eliminate the wealth gap. I would like 

to turn it over to the other members of Congress to make opening remarks and 

then we will get to our panelists. 

8 
13 

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, RANKING 

MEMBER, AND A U.S. SENATOR FROM MAINE 

Senator SNOWE. Thank you, Chair Landrieu, for holding this 

hearing today to examine the implementation of the Small Business Jobs Act of 2010. It is fitting that we would be exploring the 

implementation of this legislation at a time which is coinciding 

with National Small Business Week that highlights and celebrates 

the accomplishments of our nation’s nearly 30,000,000 small firms. 

Now, perhaps more than ever, we will rely on small business to 

lead us out of our continued economic morass as they have done 

time and time again in the past. 

I appreciate that we have Small Business Administration Deputy 

Administrator Marie Johns and Deputy Assistant Secretary Don 

Graves here to update us today on the status of the Jobs Act, and 

I especially thank our small business witnesses for offering their 

perspectives as well. 

As Ranking Member of this Committee, I certainly know firsthand that there is no more urgent imperative than job creation in 

our country. Our nation has now endured 27 straight months with 

unemployment at 8 percent or above. And last month, unemployment once again reverted to an unacceptably high 9 percent. 

We cannot allow these persistently high levels of unemployment 

to become the new normal. It is essential that we focus, like a 

laser, on bolstering our economy and creating jobs. And the best 

way to spur economic growth is to empower our nation’s small 

businesses. Whether reducing regulatory burdens, increasing access to capital, supporting pro-growth tax policies or encouraging 

exporting, we must continue to seek ways to create a better climate 

for small businesses across the country. 

It is with this in mind that we developed a framework for the 

Jobs Act through a series of small business bills. The Act includes, 

as the Chair has indicated, many of the Committee’s long-standing 

priorities, and certainly mine. 

For instance, increasing the maximum loan limits for the SBA 

7(a), 504, and microloan programs. The Act expands export technical assistance and trade promotion. It included tax measures like 

those to permit general business credits to be carried back five 

years and taken against the Alternative Minimum Tax. 

Unfortunately, I had serious misgivings about the Treasury 

Small Business Lending Fund that was included in the legislation 

on the Floor. I was particularly concerned by the Congressional 

Budget Office score warning that, when analyzing the Lending 

Fund with the most comprehensive methodology, it could potentially cost taxpayers more than $6.2 billion. 

Furthermore, just last week, the Treasury Inspector General’s 

Office issued a report on the implementation of the Lending Fund, 

which suggests that interest in the program is tepid, at best. In 

fact, according to the report, Treasury now expects to only distribute about one half to two thirds of the authorized $30 billion. 

As of April 18, only 626 lending institutions out of approximately 

7,000 nationwide had applied to participate in the initiative, and 

only $9.2 billion in funding had been requested. Moreover, the 

TARP recipients, otherwise known as the Troubled Asset Relief 

Program, have requested a full 64 percent of that $9.2 billion. 
14 

These institutions would essentially be paying off one taxpayerfunded credit card, TARP, with another in the form of the Lending 

Fund, to obtain lower interest rates without restrictions like those 

on executive compensation. 

The report revealed that TARP recipients are not expected to get 

much additional capital beyond their outstanding TARP investment 

balances, placing in doubt how much new lending will actually take 

place. 

So, this begs the question: Is not this lending fund proving to 

largely be a TARP refinancing program? It has obviously been demonstrated that there has not been great interest in the initiative. 

I know the Administration is extending the deadline for applications from March 31 to May 16 of this year, and I would like to 

explore that with you, Mr. Graves. 

While I clearly have concerns with the Lending Fund in particular, I hope that we can have a constructive dialogue with respect to its implementation, but also the outcomes that are occurring with all the other initiatives that were incorporated in this 

legislation that ultimately became law last fall. 

I am eager to hear about the desired effects of these initiatives 

because it is critically important in the final analysis to ensure 

that these programs are efficient and effectivene and that they are 

producing results. 

We have got to turn this economy around. We have to create 

jobs, and I know that we created 244,000 jobs last month, but we 

would have to continue at that rate every month for five years in 

order to achieve the pre-recession levels of unemployment of 2007. 

So, that underscores the magnitude of the challenge before us as 

a country and that is why many of the initiatives in this Act are 

going to be very good in terms of working in that direction, but we 

have to make sure that it is done well and it is implemented efficiently so that we can achieve the results more immediately. 

So, I thank our witnesses here today and the Chair for convening 

this hearing. Thank you. 

[The prepared statement of Senator Snowe follows:] 
15 

SENATE COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

Small Business Recovery: Progress Report on Small Business Jobs Act 

0/2010 Implementation 

Ranking Member Olympia J. Snowe 

May 19,2011 

Thank you, Chair Landrieu, for calling this critical hearing to examine the 

implementation of the Small Business Jobs Act of2010 ("Jobs Act"). It is fitting 

that we are examining this critical law during National Small Business Week, a time 

to highlight and celebrate the contributions of our nation's nearly 30 million small 

firms. And, now more than perhaps ever before, we will rely on small business to 

lead us out of our continued economic morass, as they have done time and time 

again. 

I appreciate the members of the Administration - Small Business 

Administration ("SBA") Deputy Administrator Marie Johns, and Department of 

Treasury ("Treasury") Deputy Assistant Secretary Don Graves - for joining us 

today to provide an update ou the status of Jobs Act initiatives. And I especially 

thank the members of the small business community who will speak on our second 

panel. We look forward to hearing about your experience with, and thoughts about, 

the various measures contained in the Jobs Act. 

As Ranking Member of this Committee, I know firsthand that there is no 

more urgent imperative than job creation in our couutry. Our nation has now 

endured 27 straight months with unemployment at eight percent or above. And just 

last month unemployment once again reverted to an unacceptable nine percent! We 

cannot allow these outrageous levels of unemployment to become the new normal. 

Therefore, it is essential that we focus like a laser on jumpstarting our economy and 

creating jobs. 

And the best way to spur economic growth is to empower our nation's small 

businesses, which generate two-thirds of all new jobs annually. Whether reducing 

regulatory burdens, increasing access to capital, supporting pro-growth tax policies, 

or encouraging exporting, we must continue to seek ways to create a better climate 

for small busincsses across the nation. It is with this in mind that we developed the 

framework for the Jobs Act through a series of critical small business bills. 

The Act included many of my longstanding priorities, from legislation that I 

introduced or championed, as Ranking Member of this Committee and a Senior 

Pae;e I of3 
16 

Member of the Senate Finance Committee. For instance, it included key lending 

provisions that I initially authored to increase the SBA's maximum loan limits for 

7(a) loans from $2 million to $5 million, for basic 504 loans from $1.5 million to $5 

million, and microloans from $35,000 to $50,000. These changes are critical to 

ensuring that SBA loans remain relevant to the needs to today's borrowers, who 

often require more capital than previonsly allowed. 

The law also includes small business exporting provisions from legislation I 

introduced with Chair Landrieu, such as larger SBA export loan limits, expanded 

export technical assistance, and enhanced aid for trade promotion. These initiatives 

have garnered broad, bipartisan support from the Obama Administration, the V.S. 

Chamber of Commerce, and others. 

The Jobs Act also included key initiatives that I had worked on with Finance 

Committee Chairman Baucus and Ranking Member Grassley to provide tax relief 

to our nation's small firms. These included measures like allowing general business 

credits to be carried back five years and taken against the Alternative Minimum 

Tax; another that increased the business expensing limitation to $500,000 for 

equipment - double the amount previously permitted, and bifurcating that amount 

so that up to $250,000 of expenses for real property can be expensed and the 

business can still purchase up to $250,000 of equipment. And the law includes a tax 

provision that former Chair of this Committee - Senator Kerry - and I have long 

championed to allow for the complete exclusion on capital gains attributable to 

small business stock held for five years. 

Regrettably, although the Jobs Act contained many of my priorities, I made 

the difficult decision to vote against its passage for several reasons. For instance, the 

Majority "filled" the amendment tree, and prohibited Republicans from offering 

constructive amendments to benefit small businesses further, or to address critical 

problems that we had with certain provisions in the bill. Additionally, and perhaps 

more seriously, the final iteration of the Act included a controversial Treasury 

Small Business Lending Fund provision. 

I had very serious concerns with the Lending Fund from the outset, and they 

have only been augmented to this day. For instance, I am exceedingly alarmed that 

the Congressional Budget Office ("CBO") score indicated that - and I quote: 

"Estimates prepared on a 'fair-value' basis include the cost of the risk that 

the government has assumed; as a result, they provide a more comprehensive 

Page 2 of3 
17 

measure of the cost of the financial commitments than estimates done on a 

FCRA [FIC-raJ basis or on a cash basis. CBO estimates that the cost of the 

SBLF [Lending Fund] on such a fair-value basis (that is, reflecting market 

risk) would be $6.2 billion." 

But Congress included the Lending Fund without fully considering its cost and 

while knowing that it could risk as much as $6.2 billion in taxpayer funds. 

Just last week the Treasury Inspector General's Office issued a report on the 

implementation of the Lending Fund, which suggests that interest in the program is 

tepid, at best. In fact, according to the report, Treasury now expects to only 

distribute around one-half to two-thirds of the authorized $30 billion. As of April 

18'h, only $9.2 billion of the funds had been requested. Furthermore, a mere 626 

lending institutions, out of approximately 7,000, have applied to participate. Of 

those, a full 43% were Troubled Asset Relief Program (T ARP) recipient banks that 

are seeking 64% of the total funds that have been requested. These institutions 

would essentially be paying off one taxpayer-funded credit card - T ARP - with 

another, in the form ofthe Lending Fund, to obtain lower interest rates without 

restrictions like those on executive compensation. And the report revealed that 

T ARP recipients are not expected to get much additional capital beyond their 

outstanding TARP investment balances, placing in doubt how much new lending 

will actually take place. So this begs the question ... Isn't the Lending Fund proving 

to largely be a TARP refinancing program? 

With such lackluster interest in the initiative, the Administration extended 

the deadline for applications from March 31, 2011 to May 16,2011. I fear that by 

extending deadlines, the Treasury may be pushing lenders into the program or too 

readily approve applications for the initiative to bolster its image. 

While I clearly have concerns with the Lending Fund in particular and I 

hope that we will have a constructive dialogue about its implementation - there are 

numerous provisions in this Act that can help small businesses, and I am very eager 

to hear about whether they are having their desired effect. In the final analysis, we 

must be doing everything in our power to help small businesses get our nation's 

economy back on track. I am hopeful that the Small Business Jobs Act provides us 

with a solid foundation for a sustained recovery. 

Thank you, Madam Chair. 

Page 3 of3 
18 

Chair LANDRIEU. Senator Shaheen. 

OPENING STATEMENT OF HON. JEANNE SHAHEEN, A U.S. 

SENATOR FROM NEW HAMPSHIRE 

Senator SHAHEEN. Thank you, Chair Landrieu and Ranking 

Member Snowe, for holding the hearing today on the implementation of the Small Business Jobs Act. It is fitting that we are doing 

it during small business week. 

The Jobs Act was a very important effort to help small businesses that create two thirds of the jobs in this country. We all 

know there is more work to do because too many small businesses 

are still struggling with access to credit. 

I, unfortunately, cannot stay to hear your testimony, but I did 

want to phase two issues that I hope you will address. First of all, 

both Senators Landrieu and Snowe have talked about the export 

provisions in the new legislation. 

In New Hampshire we think those are critical. We have got to 

give small businesses access to international markets to help them 

grow, and I think New Hampshire is one of the 53 states that has 

applied for funding through the State Trade and Export Promotion 

Program. 

So clearly there is a lot of interest. I think the role that SBA can 

play in coordinating the export efforts across the Federal Government will really be critical. 

The second provision that I wanted to call your attention to has 

to do with the 504 refinancing provisions. My understanding is that 

only 20 loans have been approved since the passage of the bill; and 

these are provisions, as we all know, that will be very important 

in giving businesses access to working capital. 

So, anything that can be done to help facilitate those loans will 

be very important. 

Thank you very much for being here. I look forward to reading 

testimony and hope you will give real consideration to moving of 

those two provisions. 

Chair LANDRIEU. Why do we not go right into the testimony from 

Administrator Marie Johns and then Mr. Don Graves. 

STATEMENT OF HON. MARIE JOHNS, DEPUTY 

ADMINISTRATOR, U.S. SMALL BUSINESS ADMINISTRATION 

Ms. JOHNS. Thank you. Good morning, Chair Landrieu, Ranking 

Member Snowe and to Senator Shaheen and members of the Committee. 

As has been cited a time or two, this is National Small Business 

Week, and it is the week we celebrate and empower small businesses that drive our economy, keep America competitive, and importantly create jobs. 

The SBA is hosting a three-day conference here in Washington, 

DC, where we are honoring small business owners with awards for 

Small Business Champions, Small Business Persons, Chair 

Landrieu, of the Year, and more. These small business owners and 

others like them have gotten a big boost from the Small Business 

Jobs Act. 

Since the passage of the Jobs Act in September 2010, SBA has 

worked hard to implement the many provisions that affected our 
19 

programs. The Jobs Act affected all of SBA’s largest programs, including our support for access to capital, small business contracting, counseling and training, and exporting. Some of these provisions were quick fixes and easy to implement. Others will take 

more time, but rest assured that SBA is working diligently to implement every provision as soon as possible. 

To begin with, almost immediately, the agency began making 

loans with the temporary increased guarantee and reduced fees authorized by the Jobs Act. This helped us put $12 billion in loans 

into the hands of small businesses at a time when they needed that 

lending support more than ever. 

Second, the Jobs Act also raised the limits on our loan sizes, 

from $2 million to $5 million. This increased size will help manufacturers, exporters, and other small businesses. For example, 

Great Falls Marketing in Auburn, Maine received approval of a 

$2.6 million loan for purchase of an existing business. They anticipate creating 80 jobs as a result. 

The Jobs Act also contained 19 provisions making it easier for small businesses to compete for and win more of the $500 billion 

in federal contracts awarded each year. 

For instance, the law reaffirmed equal treatment or parity across 

federal contracting programs. This meant that, when awarding contracts that are set-aside for small businesses, contracting officers 

are free to choose among businesses owned by women and servicedisabled veterans, as well as businesses participating in the 

HUBZone and 8(a) programs. 

And the SBA quickly implemented the repeal of the Competitiveness Demonstration program, which will help small businesses 

compete for contracts in areas such as construction, landscaping 

and pest control. 

Third, the Jobs Act also provided funds for counseling and train- ing, which included $50 million in grants for our Small Business 

Development Centers around the country. All of this money is out 

of the door and is going to fund innovative counseling projects in 

areas such as exporting, regional innovation clusters, and support 

for young entrepreneurs and under served communities. 

The fourth and final way the Act is helping small businesses is 

through increased support for exporting. 

The Jobs Act raised the size limits on our International Trade 

and Export Working Capital loans to $5 million and Export Express loans to $500,000, and it also made the Export Express program permanent. 

And Chair Landrieu already has cited the great success of Baker 

Sales in Slidell, Louisiana as one of the examples of how these 

tools have been put to use by small companies in creating jobs. 

At the same time, SBA is reviewing and evaluating the first year 

proposals for the State Trade and Export Promotion grants pilot, 

which will fund $30 million to state programs this year to increase 

exporting. 

As we implement provisions of the Jobs Act, we have continuously sought input from small business owners, lenders, and other 

stakeholders. 

The SBA’s Jobs Act Tour has already visited ten cities, with 

three more planned in the very near future. At each tour stop, top 
20 

SBA officials are sharing information on how small business owners can take advantage of the Jobs Act, as well as talking with 

them about what works, what we can build on, and what needs to 

be improved going forward. 

The response to the Jobs Act Tour has been overwhelmingly positive. In the surveys conducted after each tour stop, 92 percent of 

the respondents felt that they had a chance to give input to SBA 

on its programs; 94 percent of respondents learned new, valuable 

information about SBA programs; and 95 percent of respondents 

thought they would be able to use the information they learned at 

the event to help their business. We have had over 1900 attendees 

thus far, and we are expecting a total of 2600 by the end of the 

tour. 

I am very pleased to be here today. Thank you for this opportunity to discuss the Small Business Jobs Act, and I am happy to 

take your questions. 

[The prepared statement of Ms. Johns follows:] 
21 

TESTIMONY OF MARIE JOHNS 

DEPUTY ADMINISTRATOR 

U.S. SMALL BUSINESS ADMINISTRATION 

BEFORE THE 

UNITED STATES SENATE 

COMMITTEE ON SMALL BUSINESS Al"llD ENTREPRENEURSHIP 

"!:.MAU BUSINESS RECOVE,J?Y: PROGRESS REPORT ON 

SMALL BUSINb"SS JOBsAcT OF 201() IMPLEMENTATlON" 

MAY 19,2011 

Chnirw()11TI3'11. Ranking of this committee. thank 

small businesses to compete for ana win 

instance. across federal 

means when 
22 

free to choose among businesses owned by women and service-disabled veterans, as well as businesses 

participating in HUBZone and 8(a) programs. 

And the SBA quickly implemented the repeal of the Competitiveness Demonstration program, which 

will help small businesses compete for contracts in areas such as construction, landscaping and pest 

control. 

Third, the Jobs Act also provided funds for counseling and training, including $50 million for grants to 

our Small Business Development Centers. All of this money is out the door and going to fund 

innovative counseling projects, in areas such as exporting, regional innovation clusters, and support for 

young entrepreneurs and underserved communities. 

The fourth and final way the Act is helping small businesses is through increased support for exporting. 

The Jobs Act raised the size limits on our International Trade and Export Working Capital loans to $5 

million and Export Express loans to $500,000, and it made the Export Express program permanent. One 

company, Baker Sales in Slidell, Louisiana, received a loan of about $3 million, which the owner will 

use to help the company begin exporting to emerging countries like Panama. 

At the same time, SBA is reviewing and evaluating the first year proposals for the State Trade and 

Export Promotion grants pilot, which will fund $30 million to state programs this year to increase 

exporting. 

As we implement provisions of the Jobs Act, we have continuously sought input from small business 

owners, lenders, and other stakeholders. 

SBA's Jobs Act Tour has already visited ten cities, with three more planned in the coming months. At 

each tour stop, top SBA officials are sharing information on how small business owners can take 

advantage of the Jobs Act, as well as talking with them about what works, what we can build on, and 

what needs to be improved going forward. 

The response to the Jobs Act Tour has been overwhelmingly positive. In the surveys conducted after 

each tour stop, 92% of respondents "felt they had a chance to give input to SBA on its programs," 94% 

of respondents "learned new, valuable information about SBA programs," and 95% of respondents 

"thought they'd be able to use the information they learned at the event to help their business". We have 

had over 1900 attendees thus far, and we are expecting a total of2600 by the end ofthe tour. 

I am pleased to be here today to discuss our successes around the Small Business Jobs Act, as well as 

challenges that we face as we continue to implement its provisions. I am happy to take your questions. 
23 

Chair LANDRIEU. Thank you very much. 

Mr. Graves. 

STATEMENT OF DON GRAVES, DEPUTY ASSISTANT SECRETARY, SMALL BUSINESS, COMMUNITY DEVELOPMENT, 

AND HOUSING POLICY, U.S. DEPARTMENT OF THE TREASURY 

Mr. GRAVES. Good morning, Chair Landrieu, Ranking Member 

Snowe, and other members of the Committee. Thank you for the 

opportunity to be here today along with my colleague, Marie Johns. 

I am grateful for the chance to discuss our efforts to create the 

conditions for small businesses and entrepreneur to thrive, help 

create jobs and grow the economy. 

Small businesses are vital to our economic growth. Small firms 

employ approximately half of all Americans and are responsible for 

two thirds of net job creation. 

This is why supporting the economic conditions in which small 

businesses and entrepreneurs can thrive through improving lending conditions, tax incentives, and healthy conditions for investment has been and will continue to be a top priority. 

The Administration also recognizes the unique hardships faced 

by small businesses today. Through no fault of their own, these 

businesses have borne much of the burden from the financial crisis. 

In the aftermath of that crisis, small businesses have been faced 

with a cycle of increased customer demand, slower payments on 

their invoices and reduced lines of credit. With no other options, 

many have been forced to downsize and lay off workers. 

To help small businesses recover, grow and create jobs, last September President Obama signed into law the Small Business Jobs 

Act, the most important comprehensive piece of small business legislation in over a decade. 

Certainly the both of you in this room were instrumental and 

thank you so much for your work on that. I commend you for that 

work, and we are excited to continue to implement that legislation. 

Since the bill was signed into law, Treasury has been hard at 

work in implementing two of the programs’ crucial small business 

programs that were part of that Small Business Jobs Act. The 

Small Business Lending Fund and the State Small Business Credit 

Initiative to help small businesses access affordable credit in order 

to expand and create jobs. 

The Jobs Act also contained eight small business tax cuts, part 

of 17 small business tax cuts the President has signed into law, 

that provide additional tax relief to help small businesses invest 

and create jobs. 

At the Treasury, I oversee the State Small Business Credit Initiative and the Small Business Lending Fund. The State Small 

Business Credit Initiative is a $1 and a half billion program designed to support lending for small businesses by strengthening 

state-based capital access programs, loan guarantee and loan participation programs, state-sponsored venture capital programs, and 

other innovative state small business initiatives. 

As a result of the financial crisis and state budget shortfalls, 

many of these programs have been cut back at the very moment 
24 

they are needed the most. The SSBCI, or the State Small Business 

Credit Initiative, was intended to help reverse that trend. 

I am pleased to say that as a result of the good work of my 

Treasury colleagues, 48 states, the District of Columbia, and all 

five territories have notified Treasury that they intend to participate in the State Small Business Credit Initiative. 

We have already received 13 applications from states thus far re- questing funds that would collectively leverage over $3.2 billion in 

lending to small businesses. Treasury has approved allocations to North Carolina for $46 mil- lion and California for $169 million; and their programs have already utilized the funds to increase lending to small businesses in 

those states. Allocations for Vermont and Missouri have also been 

approved, and Missouri reports that applications to its State Small 

Business Credit Initiative program, a state-run venture capital 

fund, has already totaled more than $50 million, exceeding the 

fund’s planned initial capacity. Additional approvals for Hawaii 

and Indiana were announced earlier this week. 

The second program that I oversee is the Small Business Lending Fund which encourages lending to small businesses by providing capital to qualified financial institutions with assets under 

$10 billion. 

The program works by providing capital to participating community banks through Treasury purchases of preferred stock or debt 

instruments from each bank. 

Since banks leverage their capital, the Small Business Lending 

Fund will help increase lending to small businesses in an amount 

that is multiples of the total capital provided to participating banks 

helping small businesses to expand and create new jobs. 

The dividend or interest rate banks pay to Treasury on Small 

Business Lending Fund funding helps incent them to lend to qualified small businesses in need of financing. 

Under the Jobs Act the rate will be reduced as a bank increases 

its lending to small business insuring that the benefits of this program only go to banks that use capital to extend additional credit. 

I am pleased to report that as of this week we have received 702 

applications and total requests for $10.1 billion in funding. We expect to complete our initial application reviews in the next few 

weeks and hope to complete initial fundings of those institutions in 

June. 

We believe that the Small Business Lending Fund will have a 

meaningful impact toward increasing small business lending across 

the country which in turn will help create jobs and grow the economy. 

We are also looking ahead to identifying and addressing challenges facing small business that will be important to overcome to 

build a more competitive economy over the long term. 

In March Treasury co-hosted a conference convening policymakers, business leaders, entrepreneurs, and academics to draw 

additional attention to the evolving challenges facing startups and 

small companies, identifying opportunities to reduce barriers to 

their success and find new ways for the private sector and public 

sector to work together to help them access the capital they need 

to succeed. 
25 

With that, let me thank you again for the opportunity to be here 

today and reiterate how appreciative I am of this Committee’s work 

and the commitment to America’s small business. 

I am happy to answer any question you may have. 

[The prepared statement of Mr. Graves follows:] 
26 

EMBARGOED UNTIL DELIVERY 

Statement of Treasury Deputy Assistant Secretary Don Graves 

Small Business and Entrepreneurship Committee 

United States Senate 

May 19,2011 

Chairwoman Landrieu, Ranking Member Snowe, Members of the Committee, I appreciate the 

opportunity to discuss Treasury's efforts to help America's small businesses and encourage job 

creation. 

The Administration is committed to supporting small businesses and to creating the conditions in 

which entrepreneurs can thrive in our economy. President Obama recognizes that small 

businesses have been, and will continue to be, a vital engine of job creation and innovation in our 

economy, and that the country depends on the health and vibrancy of our small business sector to 

fuel our economic growth. 

The Administration also recognizes the unique hardships faced by small businesses today: 

through no fault of their own, these businesses have borne much of the burden from the financial 

crisis. This is fundamentally unfair. As Secretary Geithner has said, "much of the damage [from 

the recession] has fallen on ordinary Americans and small business owners who were careful and 

responsible." A crisis that began on Wall Street quickly spread to Main Street. And, in the 

aftermath of the financial crisis, small businesses were faced with a cycle of decreased customer 

demand, slower payments on their invoices, reduced lines of credit, and, with no other options, 

were forced to downsize and layoff workers. 

That is why, on September 27 of last year, President Obama signed into law the Small Business 

Jobs Act (the "Jobs Act"), the most important and comprehensive piece of small business 

legislation in over a decade. Many of you in this room were instrumental in that effort and I 

commend and thank you for your work. 

At the bill signing, the President spelled out, in simple terms, the idea that guided the 

Administration's approach to helping small businesses recover from the financial crisis: 

"Government can't guarantee success," he said, "but it can knock down barriers to success, like 

the lack of affordable credit. Government can't create jobs to replace the millions that we lost in 

the recession, but it can create the conditions for small businesses to hire more people, through 

steps like tax breaks." 

Since the bill was signed into law, we have been working hard to put this concept into action. 

Pursuant to the Jobs Act, Treasury has implemented two crucial small business programs the 

Small Business Lending Fund (SBLF) and the State Small Business Credit Initiative (SSBCI) -

to help small businesses access affordable credit in order to expand and create jobs. 

The Jobs Act also contained eight small business tax cuts - part of 17 small business tax cuts the 

President has signed into law - that provide tax relief to help small businesses invest in their 

firms and create jobs. Among other things, these tax provisions increased the amount of gain 
27 

EMBARGOED UNTIL DELIVERY 

from qualified small business stock that may be excluded from tax, extended to five years the 

carryback period for general business credits, increased the amount of investments that may be 

immediately written off, extended bonus depreciation for new investments, increased the amount 

ofthe deduction allowed for start-up expenditures, and provided a deduction for health insurance 

costs in computing self-employment taxes. 

Small Businesses are Critical to Continued Job Creation 

Recent economic news has been promising. The economy added 244,000 jobs last month. The 

private sector has created 2.1 million jobs in the last 14 months, with an average of 214,000 

private sector jobs created per month so far in 2011. Despite high energy prices and disruptions 

from the disaster in Japan, these last three months of private job gains have been the strongest in 

five years. 

The health of our Nation's small businesses is vital to a sustained recovery. Not only are small 

businesses the engines of economic growth, small businesses also contribute disproportionately 

to job creation. According to the Federal Reserve Board, small businesses employ 

approximately half of all Americans and account for roughly two out of three net jobs created. 

While we still have a long way to go, as the President has said, there are encouraging signs that 

Main Street small businesses are seeing signs of recovery. According to one recent survey, 35 

percent of small business owners are planning to hire more workers in the next six months and 

37 percent expect their businesses to grow. 

Yet, despite these signs of hope, we still have a great deal of work ahead of us. The most recent 

data available show that the smaller the firm, the slower the recovery in terms of employment. 

Moreover, the April National Federation ofIndependent Business survey shows that small 

business confidence, while improving, remains below historical levels. Although a variety of 

challenges face these firms, difficulty accessing credit, restrictive credit terms, and even the 

perception that their requests to borrow funds will be denied continue to constrain small business 

expansion. 

The Administration is committed to building on the work that has already been done to help 

small businesses fully recover and return to their traditional role as engines of job growth in our 

economy. It is our hope and belief that the various components of the Jobs Act - tax cuts, 

enhancements to existing SBA programs, the SSBCI and the SBLF - will further that goal. 

The Administration's Efforts to Support Small Businesses 

When President Obama took office, the economy was in freefall and the credit crisis had already 

taken a severe toJ] on our nation's smaJ] businesses. Credit markets were frozen, bank lending 

for smaller firms had all but dried up, sales had decreased significantly and, as a result, many 

small businesses had been forced to layoff workers. 

2 
28 

EMBARGOED UNTIL DELIVERY 

In response, the Administration has put forward a comprehensive agenda to improve economic 

conditions for America's small businesses. In partnership with Congress, we took action to help 

ensure that small businesses could access credit. Working with Congress, we helped pass 

numerous tax cuts that, among other things, allow small businesses to immediately write off 

more of their investments, carry back their net operating losses five years, use bonus depreciation 

to accelerate the rate at which they can deduct the cost of capital expenditures, and take 

advantage of a new tax credit for businesses that hire and retain workers that were previously 

unemployed. The Administration also took action through the SBA to address the severe decline 

in lending, which my colleague, Marie Johns, will discuss in more detail. 

The Administration is also focused on fostering a dramatic increase in the prevalence and 

success of entrepreneurs, which also playa critical role in creating new jobs. In January of this 

year, the Administration launched its Start Up America initiative to promote partnerships and 

policies that will benefit America's entrepreneurs and start-up companies. Start Up America will 

foster a range of public-private initiatives designed to expand access to capital for high-growth 

startups throughout the country, identify and remove unnecessary barriers to high-growth 

startups and expand collaborations between large companies and startups. 

In March, Treasury co-hosted a conference called "Access to Capital: Fostering Grov.1h and 

Innovation for Small Companies" to draw additional attention to the evolving challenges facing 

start-ups and high-growth companies, identify opportunities to reduce barriers to their success, 

and find new ways for the private sector and public sector to work together to help them access 

the capital they need to succeed. The conference convened policymakers, business leaders, 

entrepreneurs, and academics to ask questions and discuss ideas, such as the Administration's 

proposal to permanently eliminate the capital gains tax on small business stock, and provided an 

opportunity to have a fulsome discussion around challenges facing small businesses that will be 

important to overcome to build a more competitive economy over the long term. 

The Small Business Lending Fund 

At the Treasury Department, I oversee the SBLF and the SSBCI, both of which were enacted 

into law as part of the Jobs Act, and are designed to help small businesses access capital to grow 

and create jobs. 

The SBLF is a fund that encourages lending to small businesses by providing capital to qualified 

financial institutions with assets of less than $10 billion. The program works by providing 

capital to participating financial institutions through Treasury purchases of preferred stock or 

debt instruments from each bank. Since banks leverage their capital, the SBLF will help increase 

lending to small businesses in an amount that is multiples of the total capital provided to 

participating banks, helping small businesses to expand and create new jobs. 

The dividend or interest rate banks pay to Treasury on SBLF fnnding helps incent them to lend 

to qualified small businesses in need of financing. Under the Jobs Act, the rate will be reduc~d 

as a bank increases its lending to small businesses. The initial rate will be, at most, 5 percent, 

but if a bank's small business lending increases by 10 percent or more, then the rate will fall to as 

3 
29 

EMBARGOED UNTIL DELIVERY 

low as 1 percent. The Jobs Act provides that banks that increase their lending by amounts less 

than 10 percent can benefit from rates set between 2 percent and 4 percent. The Jobs Act 

therefore establishes a clear metric for measuring changes in lending after financial institutions 

come into the SBLF. Further, it ensures that the benefits of the program only go to those banks 

that use capital to extend additional credit. 

If lending does not increase in the first two years, however, the rate will move up to 7 percent. 

For those banks that have increased small business lending, their lowered rate will remain locked 

in for the following two and a half years. After 4.5 years in total, the rate will increase to 9 

percent if the bank has not already repaid the SBLF funding. 

To date, SBLF has received 702 applications and total requests for $10.1 billion in funding. To 

ensure taxpayer dollars are properly safeguarded, we have been consulting with each applicant's 

federal banking regulator and conducting detailed financial assessments of each applicant to 

assess its likelihood of repayment. Treasury also considers the views of the relevant state 

banking regulators. To participate, the bank's federal regulator must validate its viability. The 

SBLF also has been implemented with strong oversight and accountability. In addition to 

requiring a small business lending plan from participating institutions and regular reports on the 

impact of SBLF capital, the SBLF itself is subject to robust oversight from the Treasury 

Inspector General and the Government Accountability Office. 

We expect to complete our initial set of reviews in the next few weeks and we hope to complete 

initial fundings in June. 

The State Small Business Credit Initiative 

The SSBCI was funded with $1.5 billion to strengthen state programs that support lending to 

small businesses and small manufacturers. Because of the recession and ensuing state budget 

shortfalls, many small business programs at the state level have been scaled back, which, in turn, 

has posed further challenges to small businesses. The SSBCI was created to reverse this trend. 

Because the SSBCI application requires states to show that $10 in new private lending can be 

leveraged for every new federal dollar, the SSBCI is expected to help leverage $15 billion in new 

lending to small businesses. Participating states will use the federal funds for programs to help 

finance small businesses and manufacturers that are creditworthy, but are not getting the loans or 

investments they need to expand and create jobs. 

The SSBCI also allows states to build on successful models for state small business programs, 

such as collateral support programs, Capital Access Programs (CAPs), loan guarantee programs, 

loan participation programs and state-sponsored venture capital programs. Both existing and 

new state programs are eligible for support under the SSBCI. 

The SSBCI is open to any state of the United States, the District of Columbia, and any U.S. 

Territory that establishes a new, or has an existing, capital access or credit support program that 

4 
30 

EMBARGOED UNTIL DELIVERY 

meets the eligibility requirements in the Jobs Act. In certain circumstances, municipalities may 

have an opportunity to apply directly to the Treasury Department for SSBCI funding. 

Forty eight states, the District of Columbia, and all five territories have notified Treasury that 

they intend to participate in the SSBCL We have already received \3 applications from states 

thus far requesting funds that would collectively leverage over $3.2 billion. Treasury has already 

approved allocations to North Carolina ($46 million) and California ($169 million); their 

programs have already utilized the funds to increase lending to small businesses in those states. 

Vermont ($13 million), and Missouri ($27 million) allocations have also been approved, and 

Missouri reports that applications to its SSBCI -approved state run venture capital fund total more 

than $50 million, exceeding the fund's planned initial capacity. Additional approvals for Hawaii 

($13 million) and Indiana ($34 million) were announced this week. 

Looking Forward 

We believe, as do many of you, that the small business sector is an engine of job growth, 

innovation, and opportunity. Helping small businesses recover has been a priority for this 

Administration. We will continue, as the President said, to strive to create the conditions for 

America's small businesses to grow, hire, and thrive. 

Thank you again for the opportunity to appear before this Committee today. 1'll be happy to take 

your questions. 
31 

Don Graves, Deputy Assistant Secretary for Small Business, Community Development, and 

Housing Policy 

U.S. Department of Treasury 

Mr. Graves currently serves as Deputy Assistant Secretary for Small Business, Community 

Development, and Housing Policy at the U.S. Department of the Treasury. In this role, Mr. 

Graves manages a portfolio of policy issues including business and small business finance and 

development, housing finance, community and economic development, capital access, job 

creation and issues related to underserved communities. In addition, Mr. Graves oversees the 

newly created Small Business Lending Fund and State Small Business Credit Initiative. 

Previously, he served as a partner with Graves, Horton, Askew & Johns, LLC. He is the former 

Director of Public Policy for the Business Roundtable, and was previously a Policy Advisor for 

the U.S. Department of the Treasury's Office of Domestic Finance. 

Mr. Graves holds degrees of Bachelor of Arts in Political Science and History fi'om Williams 

College and Juris Doctor from the Georgetown University Law Center where he received the 

Dean's Award. He served as volunteer Chief Executive Officer of Progress Through Business, a 

national nonprofit focused on economic development, supporting lower-income employees and 

sustainability. He also served on the Board of Trustees of the Community Reinvestment Fund 

and Board of Directors of the Center on Business and Poverty, as well as the Advisory Boards of 

Wall Street Without Walls and the Greater Washington Board of Trade's Small Business 

Network. 
32 

Chair LANDRIEU. Thank you very much, and we will have a first 

round of questions by the members. We have been joined by Senator Cardin from Maryland. We appreciate him being with us this 

morning. 

Before I get into the questions, I want to submit a couple of 

things for the record that I found quite encouraging. 

One is a document that I received about a couple of weeks ago 

from the Vistage CEO Confidence Index first quarter report. It is 

the largest survey of CEOs in our country. Vistage is a for-profit 

company that has operated for many, many years. They polled 

their members that represent businesses from $5 million to 50 million. Some are a little smaller. Some are larger but that is their 

average member basically. 

The wonderful outcome is that 65 percent of these CEOs stated 

that compared to a year ago overall economic conditions in the U.S. 

from their perspective have improved. 54 percent of the CEOs expect their firms’ total number of employees will increase during the 

next 12 months. 47 percent said the best way the government can 

help create jobs is to expand access to capital, and 76 percent anticipated their firm’s sales revenues will increase. 

So, I wanted to submit that to the record. I think that is one 

piece of evidence that suggests we are moving in the right direction 

although we have many challenges ahead. 

[The documentation follows:] 
33 

Vistage Confidence Index Data 

Index ComE!onents 

Vistage Current Expected Expected Planned Expected Expected 

Confidence Economic Economic Change Fixed Revenue Profit 

Index Conditions Conditions Em!2lo~ment Investment Growth Growth 

200302 100.0 103 162 141 132 168 155 

200303 108.7 138 166 149 143 177 163 

200304 115.6 167 179 157 145 179 168 

200401 113.9 170 167 156 144 179 165 

200402 111.9 171 150 154 148 177 163 

200403 110.4 159 147 153 148 179 165 

200404 111.8 160 151 159 149 179 165 

200501 109.8 158 144 158 145 179 161 

200502 103.1 136 126 153 142 173 158 

200503 96.9 124 91 154 139 172 154 

200504 99.2 115 108 156 139 177 159 

200601 104.2 134 122 159 144 178 160 

200602 97.8 125 101 152 141 171 152 

200603 89.3 94 84 149 131 167 144 

200604 93.0 114 96 148 128 166 149 

200701 95.4 113 106 151 135 167 149 

200702 90.5 97 94 148 132 163 145 

200703 81.4 63 73 143 123 158 141 

200704 76.0 44 59 140 118 155 138 

200801 72.0 28 65 134 113 150 130 

200802 69.6 21 78 127 111 142 120 

200803 72.4 28 92 128 108 142 125 

200804 48.7 3 50 95 74 101 96 

200901 60.6 9 116 103 85 107 102 

200902 69.0 28 118 111 95 126 116 

200903 84.9 82 138 123 110 143 135 

200904 87.9 97 134 128 115 146 137 

201001 93.7 132 138 132 118 152 135 

201002 94.4 137 121 135 123 158 139 

201003 95.1 127 128 136 126 160 142 

201004 106.3 151 154 148 136 172 154 

2011 01 105.2 158 143 148 140 171 146 

NOTE: All component questions are scored as the percent giving favorable replies minus the 

percent unfavorable plus 100. The Vistage Confidence Index is the sum of the components 

calculated as a percentage of the level recorded in 2nd quarter 2003 survey. 
34 

Dr. Richard Curtin, Director of Surveys and Consumers at the University 

Ann Arbor, and Vistage consultant for the Confidence Index 

economic conditions had improved according to 63% of 

the 1st quarter; UP from 48% one year ago and just 2% two 

years ago, Only 5% thought that the economy had worsened 

the lowest percentage in six years," 

2, During the next 12 months, do you expect the overall 

economic conditions in the U.S. will be better, about the 

same, Of worse than now? 
35 

7. DC) YOu expecl your firm'!; total n\lMller C)f employees 

wi~f increase. remain ~bout the saltt$~ Or decreasec 

during the next 1l/ moritlls? 

9. 

facing currently? 
36 

10. 

11. Do you expect the Heallhcare Reform am (The 

ReconcUialiol'l.Actct 2(10) to: 

Are you tinding it easier to obtain credit for your 

business now than you did six motlths ago? 

13. Are the Federal Resent"'s current monetary policies: 

14. What should be the top priority for the Congress? 

15. How difficult is itto fi.nd people with the righhkiUs to drive 

.. your business growth? fC'-==:.:..:.:cc::..===="-t-'=4-'·=-1 
37 
38 

Chair LANDRIEU. The second is a document about the unemployment rate because I think that it is important for us to really understand the facets of the unemployment rate which we do not always by just talking about the averages. But the rate for individuals 25 years or older is only 7.6 percent. It is higher than we 

would like but it is 7.6 percent. 

Interestingly, the unemployment rate for workers with a college 

or graduate degree is only 4.5 percent in our country today. Unemployment rates for high school is 9.7, and with some college or an 

associate degree, it is 7.5. But unemployment rates for workers 

with less than a high school diploma is 14.6 percent. 

So, while this Committee can lower the unemployment rate by 

the work that we do, passing laws and new programs and policies 

to help get small businesses up and operating, some of these challenges are structural in terms of how this country is either interestingly or not, wisely investing in the workforce to provide them 

the skills they need to create jobs. 

While I will, as Chair of this Committee, take a good bit of responsibility to end this recession, I would suggest that the Committees of Health and Welfare and Education have a similar challenge 

in bringing these numbers down. 

And, I think that the Administration understands that and it is 

why they have a broad array of programs to end this recession, not 

just small business bills but we are doing our part. 

[The documentation follows:] 
39 
40 
41 

: 14. DQ you believe nationai heatllicm"e ~istation is: 
42 
43 

ORGAN1ZAf!QN 
44 

.. 

Vistage Confidence Index and 

Year-to-YearChanges In GOP 

... 21D1 _ HIll .. taos 1010 

DaofS,,"y 

.... 

.. ·Ut 

.. .,uo 

Vi stage Emp loyment Expectation sind ex 

and Year-la-Year Changes In Employment 

- - t'M'...... --,,,, 

200. H05 2GDC DOl JON HI' 2010 

Oat.ofStney 

,. 

, . 

". 

Trends in the Vistage Confidence Index show a close correspondence with year-to-year changes in real 

GOP published by the U. S. Bureau of Economic Analysis-see the chart on the lef!. The Confidence 

Index has about a six month lead and indicate a high level of economic growth in 2011. 

Trends in the Vistage Index of Employment Expectations has shown a close correspondence with year-toyear changes in total employment, published by the Bureau of Labor Statistics-see the chart on the righ!. 

The Employment Expectations Index has a six-nine month lead on actual changes in the employment 

series and indicates an accelerating pace of growth through 2011. 
45 

Chair LANDRIEU. Let me start with a question to you, Mr. 

Graves, because as a strong supporter of the Small Business Lending Fund, which is a new and innovative approach, 700 banks have 

applied. Now, that is less than about 20 percent of those that are 

eligible. 

As you know, I intended for all of the community banks to be eligible but we have run into some difficulty there because of some 

restrictions in parts of law. 

However about 3700 C Corporation community banks are eligible, yet only 20 percent have applied for funding. That is about 600 

banks. 

One way to look at it is there are 600 banks more than there 

were a year ago that have access to these funds to lend. But could 

you explain why Treasury has not made your investment decisions 

yet? 

When can some of these banks anticipate receiving the green 

light from you all? There are several in Louisiana that are actually 

quite excited about this opportunity. 

Can you shed some light on this for us? 

Mr. GRAVES. Thank you for that question. I will try to tell you 

what we are trying to do with the program. We have worked very 

quickly to try and get these two new programs that Treasury is implementing under the Small Business Jobs Act up and running. 

We have worked expeditiously. We have a very strong team that 

we have put together to stand up these two new offices within 

Treasury to get these programs off the ground. 

I think it is important to remember that while we are moving as 

quickly as we can on those programs, it is important and, in fact, 

you required us to ensure that we balance both the speed with 

which we get the programs implemented with the need to ensure 

we are making prudent investment decisions and protecting the 

taxpayers’ dollars. 

So, we have instituted a fairly robust, a very robust system of reviewing potential investments, ensuring that every institution that 

applies meets the eligibility criteria, that we then consult with federal banking agencies and in some cases state regulators when appropriate, and then Treasury performs its own individual assessment on the financial standing of that institution and its ability to 

participate in the program. 

Once we make our approval decision, we then will let the banks 

know and they will be able to close within 30 days of receiving that 

approval. 

We have conducted a significant amount of outreach with community banks all around the country. We have conducted more 

than 30 webinars, teleconferences, and industry events all across 

the country. 

We have a dedicated webpage and a call center with our Small 

Business Lending Fund team. We talk with community banks all 

across the country every single day of the week. We look forward 

to announcing our first round of funding very soon. In fact, I expect 

within the next few weeks we will be making those decisions for 

the institutions, and we will be getting to closings beginning in 

June. 
46 

Chair LANDRIEU. Okay. I am going to ask you, not right now but 

in a few minutes, your response to some other GAO report findings 

that just came out on this program. 

But let me ask Ms. Johns. If you could put the chart up, the 39 

programs that were either created or enhanced under the Small 

Business Jobs Act of 2010, most of them are completed by your 

agency and you were the implementor for this, I understand; and 

most of them have been completed. 

[The information follows:] 
47 

The Small Business Jobs Act of 2010 (Pllll-240) 

A Progress Report of SBA's Requirements 

. ' 

..... " . S\lbtlt!iovA ... Sm"J' Business AccesS to Credit ....... 

Sec.llll Section 7(a) Business Loans • Sec. 1112 Maximum Loan Amounts Under 504 Program • Sec. 1113 Maximum Loan timits Under Microloan Program • Sec. 1114 Loan Guarantee Enhancement Extensions (ARRA) • Sec. 1115 New Markets Venture Capital Company Investment limitations (ARRA) 

Sec. 1116 Alternative Size Standards • • Sec. 1117 Sale of 7(a) Loans in Secondary Market t> 

Sec. 1118 Online Lending Program • Sec. 1119 SBA Secondary Market Guarantee Authority (ARRA) g • '=' __ '" '''''''''' ,." '"""m "'~''''',,'' "",00"", • Sec. Small Business Intermediary Lending Pilot Program • Public Policy Goals • 33 Floor Plan Pilot Program Extension (ARM) • Sec.ll3S Temporary Express Loan Enhancement • Sec. 1136 Prohibition o~ndS or Tax Increases • • •.... . . .' ·SmaIlDus/ness Trade .&f~portlng . • 

Sec. 12.03 I Office of International Trade t> 

Sec. 12.04 ~ce of International Trade • Sec. 12.05 . ee Centers 0 

Sec. 12.06 International Trade Finance Programs • Sec. 12.07 State Trade & Export Promotion Grant Program • Sec.12OB Rural Export Promotion • Sec. 12.09 International Trade c?opera~ Development Centers • ,< • _': >SubtltleC CQntracting .•....... 

Sec. 1312. Leadership & Oversight t> 

Sec. 1313 Consolidation of Contract Requirements • Sec. 1314 Small Business Teams Pilot Program • Sec. 1321 Subcontracting Misrepresentations t> 

Sec. 132.2. Small Business Subcontracting Improvements • Sec.i331 Reservation of Prime Contract Awards for Small Businesses C) 

Sec. 1333 Agency Accountability • Sec. 1334 Payment of Subcontractors t> 

Sec. 1335 Repeal of Small Business Competitiveness Program • 5ec.1341 Policy & Presumptions 0 

Sec. 1342 Annual Certification t> 

Sec. 1343 Training for Contracting & Enforcement Personnel t> 

Sec. 1344 Updated Size Standards t> 

Sec. 1347 Small Business Contracting Parity & Mentor Protege Program • ,< .. ' ..... il1g,AsSlstanl:e 

Sec. 1401 rams • Sec. 1402 ... I Grants for SBDCs I • S(jbtltle E - Disaster loan Irriprovement . 

Sec.lS01 I Aquaculture Business Disaster Assistance I • 

'Completed -. *In Process-t> *Not Completed-O 
48 

But there are two particularly, there are 28 provisions that have 

been completed. That is 72 percent. Nine provisions that are in the 

process of being completed, and two provisions that are not complete. 

The two, I understand, that are not complete are the export assistance centers and then one on contracting policy. Can you comment on why the delay on those two particular programs or do you 

have any comments about that at this time? 

Ms. JOHNS. Yes, Chair Landrieu. Thank you for the question. 

And I also want to thank you for your leadership on the Small 

Business Jobs Act. And to Ranking Member Snowe, we greatly appreciate your support of many of the provisions that made their 

way into this Act. 

Overall I am very proud of the way that the SBA has moved forward to implement these provisions. We took this role very seriously because we know that small businesses were waiting for 

these critical tools to be in their hands so that they could grow 

their businesses and create jobs. 

As far as the export provisions are concerned, a lot of work has 

been done. Very shortly we will be naming a new Associate Administrator for the Office of International Trade. Individuals have been 

hired, additional trade counselors have been hired in two of the 

USEACS around the country. 

And, the process is ongoing and there is a requisition out for additional hiring. So that process is well underway. 

We have provided reports to this Committee regarding travel and 

other—— 

Chair LANDRIEU. And the contracting policies seem to be slow in 

being implemented. 

Ms. JOHNS. Well, the contracting policies, first of all, one of the 

primary contracting policies that the bill advanced was the clarification regarding parity. 

So that provisions in the bill immediately gave contracting officers across the government a clear signal, clarified rule so that 

they had much more available at their hand in order to meet the 

government’s 23 percent contracting goal for small businesses because, as you know, prior to the Small Business Jobs Act there was 

some confusion about how our programs lined up. 

But the parity issue in the Small Business Jobs Act resolved that 

and so that was an important provision under contracting. 

As far as other of the contracting provisions in the Act, as you 

know the contracting process is not, that is not a process the SBA 

owns and we cannot stand up those new provisions on our own. We 

have to go through a process through the Federal Acquisition 

Council, the FAR process, and it takes time. 

But we are moving apace and many of those provisions are 

poised to become effective in the very near future. 

Chair LANDRIEU. Thank you. My time has expired. 

Senator Snowe. 

Senator SNOWE. Thank you. 

Mr. Graves, with respect to the Treasury lending program, of the 

702 institutions that are now participating in the program, how 

many loans have actually been issued? 
49 

Mr. GRAVES. We have actually not made investment decisions on 

any of the 700 institutions that have applied, so no loans yet have 

come from capital that comes out of the program. 

The deadline for this program was September 27 and we expect 

that all applications that meet the eligibility criteria will have been 

approved by September 27 so that we will get those dollars out the 

door to the community banks so that they can do the hard business 

of supporting small businesses. 

Senator SNOWE. So, it will be this fall when small businesses 

could actually receive loans? 

Mr. GRAVES. That is a good question. We believe that beginning 

within the next few weeks dollars will begin to go out the door to 

community banks and that those banks will then on-lend based on 

the incentives built into the Small Business Job Act. 

Senator SNOWE. What I was saying earlier in my opening comments about TARP refinancing is that ultimately, what it suggests 

is that there is going to be minimal new small business lending, 

with very few new institutions participating in the program. In 

fact, as I understand it, it is only about $3 billion that would represent new institutions. Is that true? 

Mr. GRAVES. It is a good question because a number of people 

have asked that of us as well before. It is important to remember 

that this program is not a TARP program. I just want to make that 

clear at the outset. 

Any institution that meets the eligibility criteria regardless of 

whether they are a TARP institution or a non-TARP institution is 

eligible to apply and participate. 

The other thing that I would say is that this is not a program 

to assist CPP banks. In fact, there is no opportunity for an institution to decrease their interest rate without increasing the amount 

of small business lending that they do. 

Senator SNOWE. But with the threshold you are using as a standard, they only have to increase lending by 2.5 percent. So essentially, they can exchange what they receive under TARP for this 

program at a lower interest rate and they only have to increase 

their small business lending by 2.5 percent, a minimal increase, 

frankly. 

So, you are really replacing one with the other. The objective is 

not to assist the TARP recipients, but the net effect is that it is 

happening. 

The point here is that are we just turning over one program to 

the another. This same money is now benefitting those who have 

already received a great benefit from the United States Government, when we would like to invite other institutions into the small 

business lending fray to expand the loan portfolios among banks 

and other entities that can issue these loans. 

So that is one of my concerns that I think needs to be addressed. 

From what I understand, TARP recipients are seeking investments 

that exceed their remaining TARP balances by only 10 to 30 percent. So, it really does beg the question of how much new lending 

will actually occur under this program. 

And they get a 1 percent loan, am I correct, if they meet the 10 

percent increase in lending? 
50 

Mr. GRAVES. I share your concern. In fact, no CPP institution 

will get to an interest rate of 1 percent unless they increase their 

lending to 10 percent just like any other institution that participates in the program. 

The program was really meant, as I understand it, to increase 

small business lending. It is really to get capital out to small businesses all across the country. 

Senator SNOWE. And the question is how that happens. From 

what I understand, it is not exactly happening with the maximum 

effect. That is the problem here because of the perverse incentives 

created in the program. 

Now, for example, from 2008 to 2010 lending institutions’ small business lending declined by 9.2 percent to $652 billion, according 

to this chart, the second lowest level since 2005–2006. Yet the latest Thompson-Reuters/Paynet Small Business Lending Index shows 

that small business lending in March of this year already increased 

by 12 percent compared to a year ago. 

So, you are using a very exceptionally low benchmark, four quarters ending with June of 2010, to incentivize banks to increase 

small business lending when, in fact, that small business lending 

is already occurring without this program having been implemented yet. 

So, that is the problem. 

Mr. GRAVES. Would you like me to speak to that? 

Senator SNOWE. Yes. 

Mr. GRAVES. I think it is important to remember that the baseline that was set in the legislation was done so because it was really looking as a means to increase small business lending from 

where we were, as you suggest, just last year at the low water 

mark in recent years. 

And if institutions were given a baseline that was significantly 

higher, those institutions would not participate in the program. 

So, what we were trying to do is incentivize banks to increase 

their lending, giving them all the tools at their disposal, giving 

them the capital that the need so that they can actually get those 

dollars to all the small businesses around the country that are 

looking for capital. 

Senator SNOWE. Just a follow-up, because I know my time has 

expired. If banks have only maintained the 12 percent trend that 

is already occurring, they can lock-in on an interest rate of 1 percent. That is the point, and that is the incentive for them to transfer from one program to another, the TARP program to this program. Thank you. 

Chair LANDRIEU. Senator Cardin. 

Senator CARDIN. Well, first, let me thank Senator Landrieu and 

Senator Snowe for this hearing. I think one of the most important 

responsibilities of this Committee is oversight. It is one thing to 

pass laws, but it is to make sure those laws have the intended effect. I know that sometimes that is hard for a Committee to do, and 

I applaud our leadership of this Committee of understanding the 

importance by conducting this hearing. 

The legislation, the Small Business Jobs Act, had many important provisions. I was a little late getting here today because I was 

attending a conference from our small business centers, develop-
51 

ment centers on export activity. That was one of the major issues 

in this legislation, and we are making some progress on export activities. 

We also had tax credits. I think it is important for us to understand how they are working. 

The first point that has been mentioned here is this bill was 

aimed at improving access to credit for small businesses. I think 

Senator Snowe’s questions are not only good questions but we need 

to get better answers. 

This was a major initiative. Some of us would have preferred 

some of this money going into direct loans, and we were told, ‘‘No, 

this is going to be the incentive to get the community banks more 

interested in making loans to small businesses.’’ 

This was a large commitment of Federal resources. So, we need 

better answers. We need to know how much is getting out there. 

I am a little disappointed it is taking this long. I think many of 

us thought that this would get out a lot quicker and there would 

be more interest. 

So, I just want to support the questions that have been asked by 

our two leaders. We need to have better information to this Committee as to how this program is working. 

And the questions Senator Snowe asked as to whether this is 

just what would have happened and are just giving incentives to 

community banks that are not needed or whether we really have 

leveraged a lot of new activity out in the community is a question 

we need to answered. 

So, I am going to ask our leadership here to follow up and make 

sure we get information in this Committee to make sure that we 

are accomplishing what we intended to do. 

I want to talk about another part of the Small Business Jobs Act 

and that was to improve government procurement opportunities for 

small businesses. 

I helped draft a provision in the Small Business Jobs Act that 

requires Federal contracting officials to complete small business 

training before receiving certification. 

There is a real concern as to whether the procurement officers 

in our agencies have a bias towards existing relationships with contractors, mainly large businesses, to the exclusion of opportunities 

for small businesses in our community and that this Committee 

wanted to do something about that by requiring that the contracting officers have greater sensitivity to not only the letter but 

the spirit of our law to engaged smaller companies. 

There was also a second provision added that requires reports to 

Congress dealing with veteran-owned, women-owned, and disadvantaged small businesses. 

So, could I ask either of you or both of you if you could give us 

a status as to how the implementation of those provisions is working and how you intend to comply with your requirements in keeping us informed as to the progress being made in regards to those 

targeted small businesses? 

Ms. JOHNS. Good morning, Senator Cardin, and I would be happy 

to respond to your questions, and we are also grateful for your support of this important piece of legislation for our small businesses. 
52 

Our government contracting organization works regularly with 

contracting officers, and particularly the OSDBUs across all of the 

Federal agencies. We meet on a regular basis, monthly actually. 

In addition, we have a senior level effort focused on contracting 

and ensuring that across Federal agencies that at the Deputy Secretary level that those individuals are aware of what the contracting goals are across the different certification programs that 

the SBA manages and that they understand how their agencies 

need to organize and to ensure that the information flows so that 

they are also able to focus on meeting their particular goals for 

Federal contracting. 

Senator CARDIN. Are they bringing the employees in who are responsible for training? 

Ms. JOHNS. Yes, we are working with the Federal Acquisitions 

Institute and the Defense Acquisitions Institute to develop a curriculum for contracting officers. That will be an enhancement to 

the training work that we are already doing on a regular basis. 

Senator CARDIN. What is the time frame for being able to implement this training curriculum? 

Ms. JOHNS. Within the next few months. 

Senator CARDIN. Can you be more specific? 

Ms. JOHNS. Probably in the September, October time frame. 

Senator CARDIN. Will all contracting officers be required to go 

through this training? 

Ms. JOHNS. Yes. 

Senator CARDIN. How long will it take for the contracting officers 

to be able to get the benefit of this new curriculum? 

Ms. JOHNS. Senator, I do not know the end date. We have not 

established an end date. The focus has been on getting the curriculum in place and beginning the training, and we have the commitment to stay with the training as long as it takes to make sure 

that everyone is covered. 

Senator CARDIN. Could I ask that my office and I think the Committee may be also interested in reviewing the curriculum that you 

are changing and the time schedule for contracting officers and 

which agencies you anticipate being the first and the time schedule 

necessary to get all contracting officers up to speed with this new 

curriculum? 

Ms. JOHNS. Certainly. I would be happy to. 

Senator CARDIN. And the reports to Congress that are required, 

I take it you will meet those deadlines and you will get us information as to specific progress being made with veteran-owned, 

women-owned, disadvantaged small businesses? 

Ms. JOHNS. Yes, Senator, we will. 

Senator CARDIN. One last question, Madam Chairman, if I might, 

getting back to credit. There was a second part, a major initiative 

other than the SBA guarantees. We also provided funds to state 

governments who have programs dealing with credit. 

I know what is being done in Maryland but I would ask that our 

Committee be kept informed, that you provide to us the specific activities that have been generated by states as a result of the additional resources made available at the federal level. 

My reason for asking that, Madam Chairman, is following up on 

Senator Snowe’s point, I would like to see, if we could, the relative 
53 

activities generated by our partnerships with the states versus the 

additional monies being made available to community banks so we 

can see where we are getting the most activity for the resources. 

That is our responsibility. 

So, if you could make that information available to us, it tell us 

where we need to put our attention. 

Mr. GRAVES. We would be happy to do so. 

Senator CARDIN. Thank you. 

Chair LANDRIEU. And I thank you. Senator, you raised several 

excellent points, and our next panel will have some specific information about how those state programs are working. 

But I want to remind everyone that one of the reasons we could 

not do directly is because of the strong opposition from the minority party. They would not approve of direct lending from the SBA, 

and so in order to get money out to small businesses with that not 

being an option, the only option we really had was to work either 

with state programs, regional programs, or the community banks. 

So, we will see, you know. We have crafted something. We hope 

it works. We are not sure it will. That is what this hearing is 

about. I myself, as the lead architect of this bill, am very interested 

to see. 

Because there were different ideological views on both sides of 

the aisle, we really did not have all options open and available to 

us. But we did the best we could. 

Let me ask a question, and we will go through a second round 

of questions and then get to our second panel. 

One of the things I was most interested in, and I am not sure 

we were able to be successful, was giving some relief for debt refinancing for the commercial real estate section. We wrote a section 

in the bill entitled small business access to capital trying to provide 

some relief refinancing. 

Our understanding, however, is that there has been minimal 

usage of this program. We are hearing from banks that the rules 

that are written which we think might be much more narrow than 

what our law intended is not helping to provide the relief that we 

had hoped for. 

So, Mr. Graves, do you have any comments about this particular 

section, or Ms. Johns? 

Ms. JOHNS. Yes, Senator. Chair Landrieu, I would be happy to 

respond. 

The 504 commercial refinancing initiative was a new program for 

us. In every instance when we have a new program, we are always 

balancing two key objectives, that is, getting the program into the 

hands of small businesses as soon as possible but also ensuring 

that we are delivering the program in a way that ensures that we 

are good stewards of the Federal resources. And so those are the 

objectives that we were balancing as we rolled out the 504 refi. 

Once we put the initiative into the marketplace, we also are constantly gauging how the market is responding. In the case of 504 

refi, it became clear to us that we needed to take a second look at 

opening up the provisions of the 504 refi to include more businesses, and that we have done. We have made a mid-course correct. 
54 

The comment period on the change has just closed. We made 

sure that we contacted all of the industry associations and talked 

with them and we were in close contact as we were developing the 

mid-course correction, and so we are looking forward to getting the 

new 2.0, if you will, version of the program in place, and we are 

sure that we will see some progress. 

Chair LANDRIEU. Because this is very, very, very important. 

Many, many, many small businesses have seen, of course, the 

value of their buildings that they own or their commercial collateral basically decline but they still have fairly strong balance 

sheets and a refinancing opportunity could really help them. 

If it is done correctly, it will work; and if not, it is going to be 

another missed opportunity for businesses out there, and contribute to the spiraling down of this market. 

So, again, our Committee cannot do everything in this regard but 

this is a very special initiative. Please keep us posted as to how. 

And if it is the language of the law that is preventing you, the way 

we wrote it, then I would be open to some modifications. But hopefully you can take the language as it was written and implement 

the rules so that it is actually works and people can take advantage of it. 

One more question. Then I will turn it over to Senator Snowe for 

her second round of questioning. 

The Jobs Act, we talked about this but it is worth repeating 

again. The State Trade and Export Promotion Grant Pilot Program, can you provide the Committee with an update on the status 

of this program? Specifically, how many of the 56 eligible states 

have submitted applications for this particular program? 

Ms. JOHNS. Yes, Senator, I would be happy to do that. We have 

received applications from, I believe, 53 of the 56 eligible. In fact, 

as we speak, there is an interdisciplinary team of reviewers who 

are meeting at the SBA. They have been there all week. 

We compiled a team of folks from around the agency to bring 

various expertise to the review process. In addition, we also sought 

out reviewers from other Federal agencies. So, we have a reviewer 

from Ex-Im Bank, and we have a reviewer from the Department 

of Commerce because we wanted to have the strongest possible 

team. 

They are hard at work this weekend and intend to complete their 

work by the end of the week. So, we are very eager to make these 

selections, get these proposals, the response to proposals back out 

to the states. 

Chair LANDRIEU. Okay. Finally, as I turn it over to Ranking 

Member Snowe, I want to be very clear that I agree with Senator 

Cardin that the oversight of this Committee is important. 

Instead of just sitting here twiddling our thumbs and wringing 

our hands because we do not know what do to help small business, 

we have tried many different things. 

We are now in the process of evaluating what works well and 

what is not working, but you cannot stand still in a situation like 

this and do nothing. You must move forward aggressively. 

We have started new regional programs, export programs, partnerships with our community banks. We did everything but direct 
55 

lending because we were blocked from doing so but we could potentially revisit that later on. 

Let us see what is working and then make the adjustments as 

we go forward but getting capital into the hands of Main Street 

businesses, not businesses on Wall Street and not big multi corporations that have many ways to access capital. Main Street businesses remain our goal to drive down these unemployment rates 

and provide opportunity for the American dream. 

Ms. JOHNS. Chair Landrieu, may I make just one comment in response? 

Chair LANDRIEU. Okay. 

Ms. JOHNS. I just want to assure the members of this Committee 

that at the SBA we share your sense of urgency on that, and the 

notion of constantly looking at how the programs as we get them 

out into the hands of small businesses, we are constantly looking 

at how those programs are being received and what tweaks, what 

mid-course corrections we need to make as we did in the 504 refi. 

We reacted very quickly to that, and I want to assure you that that 

is our approach for all of these provisions. 

I am traveling regularly. Since the first of the year, I have been 

to over half of our regions talking to hundreds, literally hundreds 

of small business owners asking them about the Small Business 

Jobs Act, educating them on the tenets of the Act. 

We had a Small Business Jobs Act tour, 13 cities planned. We 

are just down to the last two cities. We are out and about as an 

agency talking regularly to small businesses and seeking their 

input on how we can do what we are doing better, how we can 

make these programs work more effectively for them. 

So, I just wanted to assure the members of the Committee that 

we share your sense of urgency on those very critical issues. 

Chair LANDRIEU. We appreciate the effort and we are going to be 

looking for some very clear results as the weeks and months unfold. 

Senator Snowe. 

Senator SNOWE. Thank you, Chair Landrieu. 

Just to follow up on the issue of direct lending, the Administration opposed direct lending as well. It essentially did not want the 

government to become a bank. There is a big difference between 

guaranteeing loans and writing and being directly involved in 

issuing those loans. 

In fact, there is an article right here in the New York Times, 

dated March 10, ‘‘Why Won’t the SBA Lend Directly to Small Businesses?’’ and there is an indication that the President responded 

that to do so, the government would have to stand up, in his words, 

‘‘A massive bureaucracy and it would take too long and you would 

be frustrated.’’ 

[The information follows:] 
56 

MARCH 10, 2010, 4:39 PM 

S.B.A. 

By ROBS MANDELBAUM 

<''11j-I''P11r''-'''''11' Steve 

If 

Dmant~SS, he asked President Obama at a 

not have Small Business Administration 

respolad€:d that so the 

was invited to 

""'uno-h'",, a week ago last ask it of the 

House Financial Services and Small Business Committees. At the he,lrllag, the 

echoed Mr. Obama's comments 

small businesses need 

to banks 

the S.BA has The Small Business 

which created the S.RA. in 1953, al10ws the agency to finance 

bUSIn_eSf;es "either with hanks or other financial 

,D ",'",U.UU'lJ. The 

makes loans to homeovl'ners and businesses after a disaster. 

And the very fact that Mr. Gordon's one of the central themes 

the recent reveals that Democrats do not share the Obama 

administration's view. In current the House has twice 

for direct loans.t The House's S.RA. reauthorization 

program tailored in \vhich 

borrowers prepare a business loan 

if the borrower meets the credit then 
57 

bank is willing to make the loan, the S.B.A. can do so itself. The program will 

sunset at the end of September 2011, and take effect again only after three 

quarters of G.D.P. decline as well as a 30 percent fall-off in the number of 

S.B.A. loans made. It would then continue until the economy showed two 

quarters of G.D.P. growth. A reserve force ofloan officers would staff this 

program, just like the disaster loan program. (It may not be all that hard to 

find a qualified work force: an industry consultant, Bob Coleman, estimates 

banks have fired 2,500 experienced S.B.A.loan officers since 2007.) 

In the Senate, Ben Cardin of Maryland, who is on the Small Business 

Committee, and Robert Menendez of New Jersey, who is not, have introduced 

bills calling for direct S.B.A. loans. However, neither of the Small Business 

Committee's leaders, the Democratic chairwoman, Mary Landrieu, and the 

ranking Republican, Olympia Snowe, who work closely together, seem 

particularly enthusiastic about the idea. (Neither senator's aides would speak 

for the record about it.) 

So why is the Obama administration opposed to direct lending? In the time 

since the president first addressed the issue in Florida, the S.B.A. has fleshed 

out its objections. While any of the nation's 100,000 bank branches could 

(theoretically) close an S.B.A. loan, the agency itself has only 68 field offices, 

according to a fact sheet distributed to members of Congress. These offices 

would require new computer systems and procedures and a lot more staff. The 

agency calculates that while it takes two government employees to oversee 

1,000 guaranteed loans, 43 people would be required to administer 1,000 

direct loans. 

Besides taking a long time to develop - nine to 12 months - a direct loan 

program would also cost "billions of dollars in administrative funds," 

according to the agency. In an interview, an S.B.A. spokesman, Jonathan 

Swain, said that administrating direct loans would be at least as expensive as 

in the disaster loan program, where they run 15 to 20 cents for every dollar 

spent. He added that the proposed Capital Backstop, which would require the 

agency to shepherd borrowers through the system, would be even more 

cumbersome. (The Congressional Budget Office has not yet estimated the 

program's cost.) 

On top of administrative expenses are the costs to subsidize loan losses, which 

the administration says would be higher than losses in guaranteed loans 

perhaps much higher. Indeed, according to S.B.A. financial statements, the 

agency's direct business loan programs had much higher cumulative loss rates 
58 

than the guarantee programs have had over their much longer lifespans -

about 19 percent compared to 6 percent. (The cumulative loss rate on direct 

disaster loans, meanwhile, is about 9 percent.) 

"If a bank isn't going to make someone a loan with a 90 percent guarantee, 

wby should the taxpayers make them a loan with a 100 percent guarantee?" 

asked Mr. Swain. The House Small Business Committee, though, maintains 

that it ought not have the same high loss rates as direct loan programs have 

had in the past. Since the S.B.A. would use the same eligibility and credit 

underwriting criteria that banks use for 7(a) loans, the committee noted in a 

report accompanying the bill, the "backstop portfolio should carry no more 

risk than that of a 7(a) private sector lender." 

It may be true, as Ms. Mills told members of Congress, that the agency "can 

get money out faster using the tools it has" than by creating a whole new 

program. But recent experience also suggests that the tools the agency had in 

hand in October 2008, were no match for the credit crisis. Lending all but 

froze; it took Congress four months to pass the stimulus, with the provisions 

that kick-started those programs. And while it is nice that S.B.A. loan volume 

has been restored to pre-crash levels - although S.B.A. lending began to 

decline a year before the freeze it may not be enough. The whole point of the 

S.B.A. is to pick up the slack when conventional loans falter. 

The Obama administration acknowledges this. "It's not that we don't 

understand there's a gap," said Mr. Swain. "We just have a different approach 

to responding to that gap." That approach is a handful of incentives aimed at 

getting banks to lend on their own: extending the stimulus provisions that 

lowered fees and raised guarantees, raising limits on some S.B.A. loans, 

offering additional capital to small banks (from a "small-business lending 

fund"), and allowing banks to refinance conventional commercial mortgages 

as government-backed 504 loans. The administration has also urged 

regulators to lighten up a bit on valuing loan collateral so that banks can lend 

more money. 

"We've taken each piece of the gap and tried to fill it with a program that 

addresses" the problems the banks face, Ms. Mills said at the joint hearing. 

But most of those tools are not yet in the S.B.A.' s possession; Congress has to 

approve them. And the problem with the president's piecemeal approach is 

that all the pieces have to be in place for it to work - what good is the higher 

guarantee if banks don't have the capital to lend or their balance sheets are 
59 

plagued by shrinking collateral value? The stimulus provisions have lapsed 

twice, and legislators may never sign off on the others. Moreover, even if all 

the administration's proposals are adopted, they may not actually induce more 

lending. Then what? In any case, they would be temporary. Come the next 

financial crisis, we will have to start from scratch. 

The Capital Backstop program, of course, faces its own its own substantial 

obstacles getting through Congress in the modern political climate, but at least 

it has the virtue of certainty, and of theoretically being ready for the next time 

credit freezes over. 

*Of course, not every business that wants a loan should get a loan. Mr. Gordon, for 

example, who acknowledges that he lacks two borrower attributes that remain 

important to banks, collateral and good credit score, may be a better candidate for 

venture capital. 

t Judging by the comments at the hearing, very few Republicans support direct S.B.A. 

lending, and several Democrats on the Financial Services Committee also objected to it. 

However, most representatives - Republican and Democratic alike - voted for it at 

least once. 
60 

So, I think the point is there are some legitimate issues in direct 

lending. In any event, I think the point here now is that we have 

to get into the oversight issues and to make sure that this program 

is working. 

I do have strong concerns on the TARP side, and I have already 

indicated that to you. One other issue. 

I have introduced a bill on a couple of issues concerning the 

Lending Program, Mr. Graves, but one of which I wanted to raise 

with you today because you may already be addressing it, is that 

my bill would prevent the Treasury from issuing a loan to any institution that has been deemed by its regulator to be unhealthy. 

What would you be doing in that regard? Do you get reports? 

How do you evaluate those who are seeking loans under this program if their regulator deems them to be unhealthy? You are not 

prohibited from still continuing to issue those loans. 

Mr. GRAVES. Thank you for that question, Ranking Member 

Snowe. 

We share your concerns about ensuring that every investment 

made in an institution is done so in an institution that is healthy, 

that has the financial wherewithal to increase its lending to small 

businesses. 

In fact, as I mentioned at the beginning, we have implemented 

a very strong and robust system of reviewing every application that 

comes from a community bank. 

Each institution has an initial eligibility assessment performed 

by the Treasury team. Then we conduct a consultation with the 

federal banking regulator of the institution. In some cases where 

it is appropriate, we conduct a consultation with the state regulator 

as well. 

Treasury has its own internal investment team that conducts a 

separate independent analysis and evaluation of each and every 

one of those applications that comes back to us from the Federal 

banking regulators before we make any decision to make an investment in a community bank. 

Really what we are trying to do is make sure that, while we are 

trying to get these dollars out the door and trying to support small 

businesses, we also want to make sure we make prudent investment decisions and do our very best to protect the American taxpayer. 

Senator SNOWE. Thank you. 

Mr. GRAVES. Thank you. 

Senator SNOWE. Administrator Johns, one of the issues I wanted 

to explore with you is that some have suggested that increasing the 

loan limits as we have under the 7(a) and the 504 programs in this 

Act would crowd out small borrowers. 

What is your response to that? I know that, according to the 

most recent data from the SBA, over 60 percent of the agency’s 7(a) 

loans over the past ten years have been under $150,000 and over 

80 percent have been under $350,000. 

It appears that the small loans have been growing faster than 

the larger loans. But can you comment on this issue because clearly we want to make sure that smaller entities, smaller businesses, 

are having access to these loans? It looks like it is certainly pos-
61 

sible that it is occurring, but I would like to hear comments from 

you. 

Ms. JOHNS. Thank you, Ranking Member Snowe. 

Actually there is no indication of any so-called crowding-out effect. In fact, I am sure we have shown you data that there was a 

major spike in lending at the end of the year. That was as a result 

of the fact that there was much pent-up demand for the 90 percent 

guarantee and the fee waivers. 

And so there was a lot of activity at the end of the year. That 

spike was not due to the larger loan size. In fact, our data shows 

that really just 3 percent of our loans are in the larger loan size 

between the $2 and $5 million. That has been very consistent over 

the course of time since the passage of the Small Business Jobs 

Act. 

So the notion of crowding-out effect has not at all occurred. 

Senator SNOWE. That is great. 

Also, as you know, on the loan guarantees we have reduced the 

borrower’s fees and the lender’s fees, and that is obviously not 

going to reoccur in this economic climate. Do you think that will 

discourage lending at all? Do you think it is going to have any net 

effect on loans? 

Ms. JOHNS. Well, certainly those were initiatives that were very 

well received by the market, but we are still continuing to see a 

general up tick in loans. The other reality is that the small business needs for capital are not monolithic. 

Yes, we have businesses who need the higher loan limits which 

is why that was an important provision in the Jobs Act, but we 

also have small businesses who have reacted very well to the increase in micro lending. 

So we have small businesses who need capital across the spectrum from the relatively small dollar loans in the micro lending 

space to the $5 million loans that are available through the 7(a) 

program and the 504 program. 

What we are charged to do as an agency is to make sure, again, 

that we are looking across that spectrum and continuing to identify 

gaps that may still exist and to keep this Committee apprised of 

that and to seek your help in addressing those. 

Senator SNOWE. Thank you. 

Chair LANDRIEU. Senator Cardin. 

Senator CARDIN. Thank you. Again I thank both of our witnesses. 

I did not mean to get into a debate on direct loans. But let me, 

if I might, just point out two things. First, SBA does make some 

direct loans in emergency situations. 

Number two, when there is a 90 percent guarantee of the SBA 

loans. In other words, when the government taxpayers are on the 

line for 90 percent of these loans, it seems to me making it a 100 

percent we can then have direct accountability. 

When you are dealing with a third party bank, it is much more 

difficult for us to get the results that we want out quickly. 

That was my point on it, but I am very proud of the Small Business Jobs Bill and I really do congratulate Senator Landrieu. I was 

at caucus meetings when you are trying to get the Floor time and 

there is no stronger advocate on behalf of small businesses and 

doing our work, than Senator Landrieu. 
62 

It is not easy to get the Floor time to get a bill passed. This is 

a major bill masking major new tools available to help small businesses and we are very proud of this bill, but our responsibility is 

oversight and to make sure that every dollar that has been made 

available is used to maximum advantage to create jobs and that is 

through small businesses. 

I come back to procurement and I know I represent the people 

of Maryland, and because of Maryland’s location, we have a lot of 

government agencies that are located here, and we have a lot of 

small businesses that depend upon government procurement. So, it 

is of great interest to the people of Maryland. 

There have been documented abuses by agencies; and one of the 

things that we have been able to do, this Committee, is to support 

the SBA and give it the tools. It was this Committee—I serve on 

the Budget Committee. It was a direct result of Senator Landrieu 

and Senator Snowe’s efforts that we were able to elevate the budget for the SBA. 

I applaud you for that, and we got that as an amendment to the 

Budget Resolution that gave the SBA the tools so that you could 

be the advocate for small businesses within the Administration. 

We know agencies at times want comfortable relationships with 

who they are already doing business with. So they bundled contracts, small contracts that could be given to small companies into 

large contracts in which only large companies can compete. 

We want you there fighting on behalf of small businesses saying, 

no, do not bundle these contracts and elbow out small companies 

from being prime contractors, because we know in the prime contract/subcontract relationships there are abuses there also. Better 

off to get small companies really into the game. 

We do put a lot of confidence in the SBA being there as the advocate on behalf of small businesses, taking up the fight within the 

Cabinet Room and within the Administration. 

The curriculum you are developing for training we see as a major 

step forward. I just urge you as you implement this law that you 

bring in the small companies and listen to their stories as to their 

experiences with the Department of Defense or with the Department of Agriculture, with all of the agencies of government, because there are horror stories out there as they try to get through 

the mine fields of getting their fair share of the procurement work 

of government. 

I appreciate your response as it relates to the curriculum that is 

being implemented and the training sessions, et cetera, but it is 

also going to take the SBA as an advocate to fight comfortability 

that currently exists in the agencies in the relationships they have 

with large contractors where we have got to get small business in 

the door there. 

Ms. JOHNS. Thank you, Senator Cardin. 

I have to say to you I could not agree with you more about the 

importance of the SBA’s role as the voice of small business. We 

take very seriously and wear very proudly that mantel of being the 

advocates for small businesses within the government and beyond. 

And as far as my personal commitment, I have been involved in 

small business issues long before I have had the honor to serve in 

this Administration in this role. 
63 

I am a local person, and a lot of people have my phone number. 

So, I am regularly taking phone calls on a Saturday, people stopping me at church, small business owners I know a lot of them, 

talking about issues and giving feedback on how our agency can 

work more effectively. 

So, believe me you have my 150 percent commitment, and that 

is why I do make it a point of talking to small businesses whenever 

possible, because that is where our richest source of information is. 

We have got to know how these programs are really playing on 

the field so that we are prepared to make adjustments as we need 

to, and that is what we do. 

Senator CARDIN. Thank you. You are going to be getting some 

more calls. I am looking at six cards that I picked up this morning 

from the small business conference. 

Ms. JOHNS. Hand them over. 

Senator CARDIN. I am taking this case work myself so I will be 

contracting you. 

Ms. JOHNS. We will be happy to come to your office and give you 

an update. 

Senator CARDIN. Thank you very much. I appreciate it. 

Chair LANDRIEU. Thank you very much. 

The contracting of small business has no stronger advocate than 

Senator Cardin. He speaks to us about that everyday, does he not, 

Senator Snowe? And thank goodness for him. 

I thank you. I have one question but I am going to ask for a response in writing about the tax provisions in the small business 

lending bill to Treasury. You can supply this in writing. When will 

you be able to provide an analysis of whether small businesses 

were able to take full advantage of the tax provisions in the bill? 

I know that some small businesses have not yet filed their returns and do a delayed filing in October but I will submit that to 

you and you can respond in writing. 

Mr. GRAVES. We would be happy to do so, Chair Landrieu. 

Chair LANDRIEU. Thank you all very much. I appreciate it, and 

we will move to second panel now. Thank you. 

As they are moving, to save time, let me begin introducing our 

second panel. We will be hearing directly from small business owners from their view and perspective how this new bill is helping 

them or providing opportunity. 

We will also be hearing from the Association of the Self-Employed, and the Vice President of a rural program from North Carolina. 

So, first let me introduce Eric Blinderman, Founder and Owner 

of Mas Farmhouse, a highly-rated New York City restaurant. He 

is currently constructing, with the help of an SBA 504 loan, a second restaurant; we are looking forward to hearing his testimony 

this morning. 

Also, Ms. Kristie Arslan, Executive Director of the National Association of the Self-Employed. This association represents the interest of America’s smallest businesses, employing themselves, one 

person. She is a New Yorker and currently serves on the Board of 

Directors of the Coalition for Affordable Health Coverage and 

Small Business Legislative Council. 
64 

And finally, Patrick Woodie, Vice President of Rural Programs 

for North Carolina’s rural center. At the rural center, he oversees 

capacity building programs in the area of infrastructure, business 

development, and workforce development. We are very interested 

to hear this morning, Mr. Woodie, how one of our state programs 

that many of us supported so wholeheartedly is working. 

So you all know your time constraints, and Mr. Blinderman, we 

will start with you. 

STATEMENT OF ERIC H. BLINDERMAN, CO–OWNER, MAS 

FARMHOUSE RESTAURANT 

Mr. BLINDERMAN. Thank you, Chairwoman Landrieu, Ranking 

Member Snowe, members of the Committee, for inviting me to testify this morning about issues pertaining to implementation of the 

Small Business Jos Act of 2010. 

To understand how the Small Business Jobs Act has impacted 

Main Street and specifically my restaurant in New York City, I 

think it is important to get a little bit of background about where 

my restaurant came from. It is a small business success story that 

was conceived initially after the tragedy of September 11 in New 

York City. 

In those troubled times, my business partner, Chef Galen 

Zamarra and I turned our attention from grieving into reconstruction which included the nuts and bolts of assembling our first restaurant. 

I was then a 27-year-old kid focusing on financial models, preparing the business plan, otherwise taking the business-side steps 

to our broad ideas into reality. Chef Zamarra, of course, focused on 

the artistic side. 

I had no experience. I was a 27-year-old kid. But with business 

plans in hand, I went to the place that had the money, banks. I 

would leave my day job at my law firm, go to the teller at HSBC, 

Chase, Bank of America, you name it, in my best business suit, say 

to the teller that I was a small business owner, here was my partner, and we were looking for a half a million dollars to sit there 

an open up a restaurant in New York City with little to no experience, no capital, and no assets. 

Fortunately, after being turned away by just about every bank 

up and down Manhattan, Wall Street, Fifth Avenue, Sixth Avenue, 

you name it, I persisted and was placed in touch with a consortium 

of other banks, a state-chartered entity called the New York Business Development Corporation (NYBDC). 

The New York Business Development Corporation’s purpose is to 

provide creative underwriting solutions for non-traditional lending 

risks, the category into which we clearly fell. Because of the 

NYBDC’s relationship with the United States Small Business Association, Small Business Administration and conventional banks, 

they were able to mentor me through what was a complicated and 

difficult SBA lending process, but with their assistance, I was able 

to procure a $500,000 SBA 7(a) term loan, a $50,000 World Trade 

Center Small Business Development Loan and was able to open 

and construct Mas Farmhouse. 

In terms of public/private partnership, the lending package 

worked exactly as designed. My partner and I used SBA guaran-
65 

teed funds to renovate a Greenwich Village restaurant which had 

gone bankrupt as a result of September 11 and converted it into 

Mas Farmhouse. 

Now, more than seven years after opening, we employ approximately 35 individuals, generate hundreds of thousands of dollars in 

city, state, and federal tax revenue each year, and continue to pay 

down the balance of our loan, without ever having never missed a 

single payment. 

Of course, all good stories must come to an end but for Mas 

Farmhouse, a small business, that ending is unclear because, despite our successes, our continued existence is bounded by the 

terms of our commercial lease which has less than three years left 

before it expires. 

Moreover, despite my best efforts to arrive at business terms 

with my current landlord, we have not been able to extend that 

lease because of various economic conditions that the landlord has 

placed upon my business as a condition of lease renewal. 

Enter the Small Business Stimulus Package of 2010. The Small 

Business Stimulus Package of 2010, as everyone is aware, was initially put to vote in July of 2010, which was around the time that 

Chef Zamarra and I had located an alternative location within 

which to either open up a sister restaurant to my current restaurant or to relocate my current restaurant should the time arise 

that relocation is required. 

At that time, I began approaching the NYBDC once again to request financial assistance not to lease the property, although the 

property was available to lease, but to purchase it outright, to obtain what I call a forever home, a place that I would have the ability to sit there and manage my business and perpetuity without 

ever having to run the risk of being thrown out from my place of 

establishment because of rent increases, because of other conditions or various other provisions which could attach as a result of 

a leasing relationship. 

And unfortunately, I was told by the NYBDC that, although we 

were a creditworthy business and we were qualified to obtain lending through various programs, the SBA’s lending limit of $2 million 

prohibited us from purchasing that property outright for conducting our expansion plans. 

In addition, the SBA informed me that the requested financing 

package was going to result in a total of nearly $60,000 in lending 

fees which, for a small business like a restaurant owner, is a very 

large sum of money. 

Notwithstanding, the NYBDC courted aggressively many lenders, 

Citibank, HSBC, Chase and others, and we ultimately settled on 

Citibank, which was the recipient of troubled asset relief funding 

and were able to procure funding in the amount of $3,179,850 to 

permit construction of Mas La Grillade, broken down in the form 

of a 504 SBA loan, $1.5 million from Citibank. NYBDC lent us $1.2 

million and a further 7(a) loan in this span of $420,000. 

The importance of this expansion to my business cannot be understated. The SBA 504 program has allowed me to purchase this 

property outright by placing only 10 percent down on our purchase 

price. Because our existing restaurant runs on tight margins as I 

explained earlier, we would never have been able to purchase this 
66 

property but for the existence of the small business stimulus package. 

Second, the collective terms of the loan package will result in my 

new restaurant paying thousands of dollars less per month in loan 

servicing costs than I currently pay in fixed costs for my existing 

restaurant. 

Most importantly, we are in the process within the next 90 days 

of hiring 65 new people to staff and run my new restaurant. 

Importantly, these benefits do not just inure to me as a business 

owner. They also inure to the City and State of New York and the 

Federal Government. For example, projected revenue of my new 

restaurant should generate hundreds of thousands of dollars in 

sales tax for the City and State of New York. 

In addition, each of my 65 anticipated employees will pay federal, 

state, and local taxes and contribute their share to social security, 

Medicare, and Medicaid, and related entitlement programs. 

Payments to the hundreds of food vendors, beverage, and other 

vendors who service my restaurant, which include local fishermen, 

farmers, and others provide additional revenue for local, state, and 

Federal coffers. 

Indeed, these benefits have already begun accruing despite the 

fact that my restaurant is under construction as we are using our 

SBA funds to employee dozens of architects, engineers, plumbers, 

electricians, contractors, and others. 

In short, the bottom line of my small business should be measured by its cash flow and profitability. I believe the same metrics 

should be utilized to measure the success of the Small Business 

Stimulus Package of 2010. 

As businesses take advantage of the bill’s benefits to open, expand, and grow, this Committee should analyze whether they are 

generating employment opportunities, contributing to economic expansion, creating new revenue streams for government entities, 

and repaying their debts with interest and without default. 

If, on balance, the net sum of loans made pursuant to the Small 

Business Stimulus Package of 2010 achieves these objectives, I 

think the United States will have benefitted greatly from it. 

I am confident that Mas La Grillade will meet these objectives 

and am grateful and thankful for the passage of this bill. 

Thank you for your time this morning and I apologize for having 

run slightly over. 

[The prepared statement of Mr. Blinderman follows:] 
67 

UNITED STATES SENATE 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

"Small Business Recovery: Progress Report on Small Business Jobs Act of 20 I 0 

Implementation. " 

TESTIMONY OF ERIC H. BLINDERMAN 

OWNER-MAS (FARMHOUSE) AND MAS (LA GRlLLADE) 

INTERNATIONAL LITIGATION COUNSEL- PROSKAUER ROSE LLP 

Thursday, May J9, 2011 

Thank you, Chairwoman Landrieu, Ranking Member Snowe, and members of the 

Committee for inviting me to testifY this morning on issues pertaining to implementation of the 

Small Business Jobs Act of2010. Although I am International Litigation Counsel at the law firm 

of Proskauer Rose LLP in New York City, I testifY today in my capacity as the founder and 

owner of a restaurant in New York called Mas (farmhouse) and as the founder and owner of a 

new restaurant called Mas (la grillade) which I am currently constructing in New York and 

which I expect will open in the late summer of2011. 

The Small Business Job Act of2010 Provided Much Needed Economic Incentives 

and Statutory Tools to Permit Small Business to Create Jobs 

The Small Business Jobs Act of 20 1 0 has served as a critical piece of legislation that 

allowed small business owners to expand existing operations, to build new enterprises, and to 

create jobs. 

A. The Use of SBA Funds to Establish Mas (farmhouse) 

By way of background, I am a restaurant owner and attorney. My business partner, Chef 

Galen Zamarra, and I conceived of our current restaurant, Mas (farmhouse), in late 2001, shortly 

after the attacks of September 11. At this time, New York was suffering from the horrific loss of 

life and property that accompanied the tragic events of that day. 

In those troubled times, Chef Zamarra and I turned our attention from grieving into 

reconstruction which included the nuts and bolts of assembling our first restaurant with no 

capital, little experience, but lots of ideas. Chef Zamarra focused on the artistic and creative side 

of the ledger while I began to write a business plan, to prepare financial models, and otherwise to 

take steps to tum our ideas into a concrete reality. With business plan in hand (neatly bound), I 

spent my lunch hours at the law firm, wearing my only suit, walking into dozens of banks 
68 

whereupon I explained to the teller that I would like to obtain a small business loan to help me, 

then a 27 year old kid, obtain over a half-million dollars so r could open a fine dining restaurant 

in Manhattan. Self-evidently, this approach was not successful and, although every bank was 

polite, they all rejected my request outright. 

Fortunately, I persisted and was ultimately placed in touch with an entity chartered by the 

State of New York called the New York Business Development Corporation ("NYBDC"). The 

NYBDC's purpose is to provide creative underwriting solutions for non-traditional lending 

risks-a category into which r clearly felL Because of the NYBDC's relationship with the 

United States Small Business Association and conventional banks, they were able to mentor and 

guide me through the SBA lending process, locate a partner bank willing to share in the lending 

risk, and ultimately to underwrite a $500,000 SBA 7(a) term loan and a $50,000 WTC Small 

Business Development Loan that we used to open Mas (farmhouse). In terms of publici private 

partnership, the lending package worked exactly as designed. My partner and r used SBA 

guaranteed funds to renovate a restaurant located in Greenwich Village which had gone bankrupt 

as a result of September 11 and to convert it into Mas (farmhouse). Now, more than seven years 

after opening, we employ approximately 35 individuals, generate hundreds of thousands of 

dollars in city, state, and federal tax revenue, and continue to pay down the balance of our loan, 

having never missed a single payment. 

Of course, all good stories must come to an end but for Mas (farmhouse), the ending is 

unclear as, despite our successes, our continued existence is bounded by the terms of our lease 

which expires in less than three years. Moreover, despite my best efforts to arrive at business 

terms with my current landlord to extend our lease, we have not been able to do so because of 

various onerous economic demands that the landlord has placed upon my business as a condition 

of lease renewaL 

B. The Small Business Stimulus Package of2010 and the 

Establishment of Mas (fa grillade) 

Enter the Small Business Stimulus Package of2010, which was initially put to vote in 

July of 2010, around the time ChefZamarra and I had finally found a location to house a new 

restaurant called Mas (fa grillade). This restaurant will either replace Mas (farmhouse) when our 

current lease expires or will operate concurrently with Mas (farmhouse) assuming we are able to 

come to terms with our landlord. That location is a modest two story red-brick structure, around 

the comer from our current location, had been vacant for several years, and the owner was 

willing to either sell or lease it to us. For Chef Zamarra and I, the decision between attempting 

to purchase the building or to lease was obvious given the difficulties we had encountered with 

our current landlord-we wanted the property outright and quickly settled on a purchase price of 

$2.5 million. 

Following on the lessons learned in opening Mas (farmhouse), I contacted the NYBDC to 

determine if they would consider assisting us in obtaining this sum of money plus an additional 

$600,000 so that we could renovate the property and open Mas (fa grillade). Although the 

NYBDC was receptive to this request, I was informed that we would not likely be able to access 

the SBA's 504 program to obtain the property because of the $2 million lending limit contained 
69 

in then-existing legislation. In addition, lending fees alone on our package were going to total 

approximately $60,000 which was a significant economic burden and rendered the viability of 

our expansion plans dubious. 

Notwithstanding, the NYBDC aggressively courted lending partners which included the 

Bank of America, Citibank, HSBC, Chase, and others who were flush with capital infusions 

provided by the Troubled Asset Relief Program but who were having difficulties finding creditworthy small businesses in which to invest. Ultimately, Chef Zamarra and I chose Citibank as 

our lending partner because of its attractive financing offer which included a fixed 25-year 

mortgage and low interest rates although the viability of our project depending nearly entirely on 

passage of the Small Business Stimulus Package. Thus, in July 2010, I watched in dismay as 

politics derailed the legislation's passage by a mere two votes. When the legislation was put up 

for vote again in September, I sat in my office voraciously counting votes while sharing live 

updates about the legislation's progress with Citibank. Fortunately, the legislation passed. 

Lending limits to small business owners were increased to $5 million, lending fees were 

eliminated, and my project was able to commence. 

Specifically, I was able to obtain a total of$3,179,850 in lending as a direct result of the 

bill's passage which is secured through personal guarantees, cross collateralization with my 

existing restaurant, and (most importantly in Manhattan) the building that I now own. In 

addition, I saved nearly $30,000 in SBA fees. The loan package itself was structured as follows: 

Citibank lent $1,533,250 through the SBA 504 program while the NYBDC lent $1,226,600 

through the SBA 504 program. Citibank lent a further $420,000 for start-up and related 

operational costs through the SBA 7(a) program, and construction is proceeding rapidly. Most 

importantly, Mas (la grillade) will be hiring approximately 65 new employees over the next 90 

days. 

The importance of this expansion to my business carmot be understated. First, the SBA 

504 program allowed me to purchase property in New York City by placing only 10% down on 

the total purchase price with lenders providing 90% of the capital. Because my existing 

restaurant runs on tight margins, we would never have been able to purchase the property for our 

new restaurant if not for the fact that we were able to finance 90% of the purchase price through 

the SBA 504 program. Second, the collective terms of the loan package will result in my new 

restaurant paying thousands of dollars less per month in loan servicing costs that I currently pay 

in fixed costs for my existing restaurant. When this is combined with the fact that the new 

location has over twenty extra seats and the capacity to serve lunch and dinner (Mas (farmhouse) 

serves only dinner), the business incentives to expand remain apparent. Third. rather than paying 

thousands of dollars per month to a landlord who shares no vested interest in the long-term 

operation of my business establishment, I am now building equity in the form of property that 

can be used to collateralize future business-expansion plans. Fourth, unlike a conventional 

leasing transaction in which my rent and related fixed costs rise each year according to set terms, 

my fixed costs at the new restaurant are set according to the terms of the various loan 

agreements. Thus, they will not rise over time and will, in fact, decrease as portions of the loan 

are paid off in full. Finally, I am now in the privileged position to have what I term "a forever 

home." In other words, most small business owners lack the ability to purchase property and 

therefore remain subject to the whims and vagaries of commercial landlords who do not share 
70 

their economic interest. Accordingly, the business asset that one spends years creating can be 

tom apart in an instant when a landlord decides (for whatever reason) that the tenant's occupancy 

is no longer desired. Because of the SBA 504 program, Chef Zamarra and I no longer face that 

risk and can focus instead on the risks of satisfying customers at Mas (la grillade). Ifwe are 

successful in meeting that challenge, then we will rest well knowing that our new restaurant will 

not have to face the Hobbesian choice of shutting down (which would cause our employees and 

staff to lose their jobs), relocating (with the attendant associates risks and costs), or accepting 

commercially unreasonable leasing terms ever again. 

Importantly, these benefits do not just inure to me as a business owner. They also inure 

to the City and State of New York and the Federal government. For example, projected revenue 

for Mas (la grillade) should generate hundreds of thousands of dollars in sales tax for the City 

and State of New York. In addition, each of my 65 anticipated employees will pay local, state, 

and federal income taxes on their earnings while also contributing their fair share to social 

security, Medicare, Medicaid, and related entitlement programs. Payments to the hundreds of 

food, beverage, and other vendors who service Mas (la grillade), which include local farmers 

and fisherman from around the region, accountants, lawyers, plumbers, electricians, and other 

trade people, provide additional revenue for local, state, and federal coffers. Indeed, these 

benefits have already begun accruing despite the fact that Mas (la grillade) is only under 

construction. As an active construction site, we are already utilizing our SBA 504 and 7(a) funds 

to employee dozens of architects, engineers, plumbers, electricians, contractors, and others who 

are on site every day and which likewise generates tax and related revenue. 

In short, the bottom line of any small business is measured in its cash flow and 

profitability. I think the same metrics should be utilized to measure the success of the Small 

Business Stimulus Package of2010. As businesses take advantage of the bill's benefits to open, 

expand, and grow, this Committee should analyze whether they are generating employment 

opportunities, contributing to economic expansion, creating new revenue streams for government 

entities, and repaying their debts with interest and without default. If, on balance, the net sum of 

loans made pursuant to the Small Business Stimulus Package of2010 achieves these objectives, 

then I think the United States will have benefited greatly from the bill's passage as will those 

business owners and entrepreneurs who had the foresight to take advantage of its tools. I am 

confident that Mas (la grillade) will meet these objectives and am grateful for the passage of the 

Small Business Stimulus Package of201O. 

Thank you for your time this morning. I will be happy to answer any questions the 

Committee might have. 
71 

Chair LANDRIEU. That is okay. 

Mr. Blinderman with testimony like that, you could run a half 

an hour over your time. It is music to my ears to hear how helpful 

our efforts have been here to you and to your restaurant. But I 

want to say how extraordinarily pleased I am that you took your 

time to come to this Committee to share your story of fighting so 

hard to create a business in the United States of America. 

I can only say it should not have been that difficult, and I can 

only say how tragic, shameful, and ultimately destructive it is 

when a gentleman with your credentials which I want to read into 

the record. He received a J.D. cum laude from Cornell Law School. 

You then graduated with distinction in international law from the 

University of Oxford. 

Yet, as you testified, you went to every bank on Fifth Street, 

Sixth Street, and beyond to try to get a loan to start a business 

and you were turned down. 

So, my question to those listening is if a gentleman with a degree 

of distinction from Oxford cannot get a loan from the United States 

banking system, how is it possible for 99 or 100 percent of the kids 

that I represent who are young people in the State of Louisiana 

who we do not go to Oxford, how is it possible for them to start 

a business? 

That is why this Committee passes the envelope for new and innovative ways to get capital into the hands of young Americans 

who we spent millions of dollars literally educating but yet our system falls so short on giving them the opportunity to start business. 

As long as I chair this Committee, we are going to continue to 

push open this door. 

Ms. ARSLAN. 

STATEMENT OF KRISTIE L. ARSLAN, EXECUTIVE DIRECTOR, 

NATIONAL ASSOCIATION FOR THE SELF–EMPLOYED 

Ms. ARSLAN. Thank you, Chair. Thank you, Ranking Member 

and the members of the Committee, for allowing the National Association for the Self-Employed to testify here today on behalf of our 

200,000 members and the 22 million self-employed Americans nationwide. 

We are here today to talk about the implementation of the Small 

Business Jobs Act and the next steps we must take to improve and 

expand upon the vital benefits it offers America’s smallest businesses. 

With the current economic dialogue so focused on jobs, it is important to note that our members and the 22 million Americans 

that are self-employed are not solely ‘‘hobby’’ enterprises or temporary freelance workers between permanent, ‘‘real’’ jobs. 

Being self-employed means you have created a job for yourself. 

Self-employed businesses successfully provide for families. They 

contribute to their local communities, and these jobs are just as 

valuable to the economy as an office or a factory job, and these 

businesses are just as essential to the economy as their larger 

counterparts. 

Despite accounting for 78 percent of all small businesses in the 

U.S. and collectively contributing close to $1 trillion to the economy 

every year, the dynamic self-employed community is too often mis-
72 

understood and under represented in the policy fashioned for small 

business. Our Nation’s lawmakers and regulatory agencies commonly craft policy geared toward the tiny sliver of the business 

population that is corporate America. The narrow policy focus on 

the small percentage of businesses is why the Small Business Jobs 

Act was so crucial to our community. This legislation included key 

provisions that benefitted the vast majority of micro-businesses and 

provided some much needed bottom line tax savings to the self-employed. 

For years the NASE has been working to allow the self-employed 

access to the same tax benefits enjoyed by all other businesses. A 

key disparity in the tax code is the treatment of health insurance 

costs. The self-employed do not received a business deduction for 

health insurance costs causing these businesses to pay more in 

payroll taxes known as self-employment tax than all other businesses. 

With the passage of the Small Business Jobs Act, the self-employed were allowed to deduct their 2010 health insurance costs 

from the self-employment tax on their 2010 tax return. What did 

this one-year deduction mean for someone who is self-employed? 

Based on the average health insurance costs out therein the individual market, the one-year deduction in this bill saved self-employed business owners approximately $456 to $968 in taxes. That 

is bottom line savings. Depending upon their cost of coverage, 

many businesses actually saved more money. 

NASE member Michael Kagan of Dover-Foxcroft, Maine, is 

owner of M. Kagan & Associates. A self-employed biotech consultant, Mr. Kagan saved $1,400 in taxes this year due to this one-year 

tax deduction in the Small Business Jobs Act, and he used that 

money to reinvest in his business in office automation and help 

grow his business exponentially. 

Timothy Doyle, a NASE member from Donaldsonville, Louisiana, an electrical contractor, saved $730 in savings from this one-year 

deduction and he put that money to pay for his next two months 

of health insurance premiums. 

In this difficult economic time, this deduction in the Small Business Jobs Act helped business owners lower their tax liability or 

provided them with a substantial refund that could be used to reinvest in their business. 

Best of all, this deduction, though temporary, put the self-employed, America’s smallest businesses, on the same playing field as 

other businesses for the first time. 

The question now should be whether we extend this benefit and 

how we better implement it for the future. 

The NASE strongly supports leveling the playing field permanently in allowing the self-employed a permanent deduction for 

health costs for payroll tax purposes. 

We understand, though, in this difficult fiscal climate that an immediate permanent solution may be difficult to achieve; however, 

we strongly feel that this deduction should be extended at least for 

a two-year period. 

Should an extension pass, we urge Congress to encourage the 

IRS to rethink its approach in implementing this vital deduction. 

The method the IRS used was very confusing and not the standard 
73 

approach for a business deduction. They created a new line, Line 

3, in Form 1040 Schedule SE, the form utilized to calculate selfemployment tax, to allow self-employed taxpayers to take this deduction. 

It would be preferable and a lot less confusing to taxpayers to include this deduction on Form 1040 Schedule C in Part II, which incorporates all business expenses. Self-employed taxpayers had to 

carefully read the directions for the 2010 Form 1040 Schedule SE 

to take advantage of this one-year deduction since deductions are 

not typically on this form. 

Furthermore, because the bill was passed so late in the year, it 

left little time for the IRS to provide guidance to stakeholders and 

taxpayers on this deduction. An extension of this critical tax deduction for the self-employed community needs to be passed as soon 

as possible in order to allow the IRS to be able to put this on the 

2011 tax form and give stakeholders the ability to educate business 

owners on how to take advantage of this benefit. 

In the current climate, policymakers on both sides of the aisle 

have been struggling to find ways to stimulate the economy. While 

efforts have been notable and have helped some industry sectors, 

only the Small Business Jobs Act has helped America’s smallest 

businesses. 

America’s self-employed have long asked for the same opportunity to success as their larger counterparts. They seek no more 

than the same benefits that big business receive. So we encourages 

lawmakers to extend the key provisions in the Small Business Jobs 

Act. Thank you. 

[The prepared statement of Ms. Arslan follows:] 
74 

11a 

Testimony of 

Kristie L. Arslan, Executive Director 

National Association for the Self-Employed 

(NASE) 

Senate Committee on Small Business & Entrepreneurship 

"Small Business Recovery: Progress Report on Small Business Jobs Act 

of 2010 Implementation" 

May 19,2011 
75 

Page 2 

On behalf of the National Association for the Self-Employed (NASE) and our 200,000 member 

businesses, I thank the Chair, Ranking Member and Committee Members for the opportunity to 

speak today on the implementation of the Small Business Jobs Act of 2010 and the next steps 

we must take to improve and expand upon the vital benefits it offered to America's smallest 

businesses. 

Today's economic growth is being driven by the incredibly diverse self-employed business 

community, and the NASE is working to ensure that they are in a position to be as successful as 

possible. We work day in and day out to actively challenge the near-universal lack of 

understanding about the self-employed. 

With the current economic dialogue focused on jobs, it is important to note that our members 

and the 22 million self-employed Americans are not solely "hobby" enterprises or temporary 

freelance workers between permanent, "real" jobs. Being self-employed means you have 

created a job for yourself and have prevented one more individual from showing up on the 

unemployment rolls. Self-employed businesses successfully provide for families and contribute 

to local communities - and these jobs are just as valuable to the economy as an office or 

factory job. These businesses are just as essential as brick and mortar businesses. 

Though vulnerable to tough economic times, self-employed businesses grow faster than all 

other segments of the economy and are historically a key driver of economic recovery after a 

recession. Business startups reached their highest levels in 14 years during 2009, suggesting 

that laid-off workers are choosing to join the ranks of the self-employed rather than take their 

chances in a job market that remains unstable. 

Yet, despite accounting for 78 percent of all small businesses in the U.S. and collectively 

contributing about $1 trillion to the economy every year, this dynamic business demographic is 

too often misunderstood and underrepresented in the policy fashioned for small business. Our 

nation's lawmakers and regulatory agencies commonly craft public policy geared toward the 

tiny sliver of the business demographic that is corporate America. 

This narrow policy focus on a small percentage of businesses is why the Small Business Jobs Act 

was so crucial to our community. The Small Business Jobs Act of 2010 included key provisions 

that benefited the vast majority of micro-businesses and provided some much needed bottomline tax savings to the self-employed. 
76 

Page 3 

Tax Equity for the Self-Employed 

For years the NASE has been working to allow the self-employed access to the same tax 

benefits enjoyed by all other businesses. A key disparity in the tax code is the treatment of 

health insurance costs. The self-employed have not received the same tax deduction for health 

costs that all other businesses entities have at their disposal. 

The self-employed must pay the employer and employee contribution to payroll taxes, totaling 

up to 15.3 percent on business income. For the self-employed, payroll taxes are called selfemployment taxes. Since they do not receive a business deduction for their health insurance 

costs, they must pay more in payroll taxes than other businesses who receive this full benefit. 

With the passage of the Small Business Jobs Act of 2010, the self-employed were allowed to 

take a one-year tax deduction on health insurance costs for the purposes of calculating selfemployment taxes. Qualifying business owners could deduct their 2010 health insurance costs 

from their self-employment tax on their 2010 tax return. 

What did this deduction mean to someone who is self-employed? Health insurance and taxes 

are the two highest costs for small business. Annual premiums in the individual market 

averaged $2,985 for single coverage and $6,328 for family plans nationwide in mid-2009, 

according to a report released by America's Health Insurance Plans (AHIP). Based on these 

costs, the one-year tax deduction in the Small Business Jobs Act of 2010 saved self-employed 

business owners approximately $456.71 to $968.14 in taxes. Depending on the cost of their 

health coverage, some businesses likely saved even more. 

In this difficult economic time, this deduction helped business owners lower their tax liability or 

provided them with a more substantial refund that could be used to reinvest in their business. 

Best of all, this deduction - though temporary - put the self-employed, America's smallest 

businesses, on the same tax playing field as other businesses for the first time. 

NASE Member Michael Kagan of Dover-Foxcroft, Maine, is owner of M. Kagan & Associates. He 

is a self-employed biotech consultant with over twenty-five years of experience as an 

engineering and manufacturing executive in both developing and bringing products to market. 

Mr. Kagan saved $1,400 in taxes due to the one-year tax deduction for health insurance costs ir 

the Small Business Jobs Act, which he reinvested in office automation for his growing business. 
77 

Page 4 

Timothy Doyle, a NASE Member from Donaldsonville, Louisiana, is an electrical contractor and 

the owner of High Standards Electric, LLC. He took his $730 in tax savings and put it towards his 

next two months of health insurance premium costs. 

Bullseye Appraisal's owner, Adrian Stumbagh of Spokane, Washington, saved $940 in taxes. 

The deduction helped lower his tax liability on his return, saving him money. 

These are just a few examples of the millions of self-employed business owners who benefited 

from the self-employment tax deduction on health insurance costs in the Small Business Jobs 

Act. 

The question now is should we extend this benefit and how can we better implement this 

deduction in the future. 

Next Steps 

The NASE strongly supports leveling the playing field for the self-employed and providing them 

with a permanent deduction on health insurance costs for payroll tax purposes. It is imperative 

that the 22 million self-employed Americans receive the same tax treatment of health care 

costs as all other businesses. 

While we understand that due to the fiscal climate an immediate permanent solution may be 

difficult to achieve, we believe that at a minimum this deduction should be extended for a twoyear period. 

Should an extension be passed, we strongly urge Congress to encourage the IRS to rethink its 

approach to implementing this vital deduction. The method the IRS employed to provide selfemployed taxpayers with the deduction was confusing and not the standard approach for a 

business deduction. They created a new line (Line 3) on the 2010 Form 1040 Schedule SE, the 

form utilized to calculate self-employment taxes, to allow self-employed taxpayers to take this 

deduction. 

It would be preferable and less confusing for self-employed taxpayers to include this deduction 

on Form 1040 Schedule C in Part II, which incorporates all business expenses. Self-employed 

taxpayers had to carefully read the directions for the 2010 Form 1040 Schedule SE to take 

advantage of this one-year deduction since deductions are not typically on this form. 
78 

Page 5 

Furthermore, the Small Business Jobs Act was passed late in the year, leaving minimal time for 

the IRS to provide guidance to stakeholders and taxpayers on this deduction. An extension of 

this critical tax deduction for the self-employment community should be passed as soon as 

possible to allow the IRS sufficient time to implement the provision on the 2011 tax forms and 

to give stakeholders the ability to properly educate business owners on this benefit. 

Other Key Provisions in the Small Business Jobs Act 

Many of the new jobs recently created are also new companies - the startup rate in 2010 was 

the highest it has been in 15 years, according to the Kauffman Index of Entrepreneurial Activity. 

More than half a million new businesses were created in 2010 as the poor economy and high 

employment rates have led more individuals into business ownership. 

The Small Business Jobs Act provided for an increase in the deduction for startup expenditures 

in 2010 to help these new businesses. The deduction was doubled, permitting new 

entrepreneurs to deduct up to $10,000 in expenses. This provision, unlike the self-employment 

tax deduction, was authorized for two years allowing startups to benefit from this improved 

deduction for one more year, on their 2011 tax return. With small businesses growing faster 

than their larger counterparts and accounting for 64 percent of net new jobs created, the NASE 

feels that it is essential to permanently allow new businesses this increased deduction for 

startup expenditures. It is imperative in this new economy that we foster the creation of new 

businesses as the startup deduction does. 

Access to capital also continues to be a large problem for the self-employed and microbusinesses, despite efforts by the federal government to spur lending to small businesses. The 

NASE was a strong supporter of the Small Business Lending Fund included in the Small Business 

Jobs Act. However, eight months after the bill was signed into law, money has yet to reach the 

community banks, credit unions, community development funds and other intended lending 

institutions. Thus, small businesses have not received any benefit from the Small Business 

lending Fund. 

lawmakers must encourage the Administration to move quicker on implementing this portion 

of the Small Business Jobs Act so business owners can begin working with their lending 

institution to obtain much needed funding. 
79 

Page 6 

Conclusion 

Policymakers on both sides of the aisle have been struggling to stimulate the economy and put 

a definitive end to the Great Recession. These efforts have included sector·specific bailouts, 

export and manufacturing initiatives, the American Recovery and Reinvestment Act of 2009 

amongst other policy approaches. While all of these programs helped some notable companies 

and stimulated some industry sectors, most of these efforts provided little benefit to the typical 

American business. The lone bill providing the majority of our nation's small business with 

some actual, bottom·line cost savings was the Small Business Jobs Act of 2010. 

America's self·employed have long asked to have the same opportunity for success afforded to 

big business. They seek no more than the same benefits received by their larger counterparts. 

The NASE encourages lawmakers to stand up for America's smallest businesses and extend key 

provisions in the Small Business Jobs Act of 2010. 
80 

Chair MURRAY. Thank you. 

Mr. Patrick Woodie. 

STATEMENT OF PATRICK WOODIE, VICE PRESIDENT, RURAL 

DEVELOPMENT PROGRAMS, THE NORTH CAROLINA RURAL 

ECONOMIC DEVELOPMENT CENTER, INC. 

Mr. WOODIE. Thank you, Madam Chairman and members of the 

Committee, for this opportunity to report to you on North Carolina’s implementation of the North Carolina Capital Access Program. 

I am Patrick Woodie, Vice President of Rural Development Programs for the Rural Economic Development Center. For more than 

20 years, our nonprofit organization has developed, promoted, and 

implemented sound economic strategies to improve the quality of 

life for rural North Carolinians. 

Typically, the Rural Center works in 85 of North Carolina’s 100 

counties. The North Carolina Capital Access Program is the exception. At the request of North Carolina’s Governor, Beverly Perdue, 

the Rural Center is leading this statewide effort to spur new job 

creation and business investment. While the State Small Business 

Credit Initiative offers states the flexibility of using their allocation 

to boost small business lending, North Carolina has elected to invest its full allocation in the Capital Access Program, or NC–CAP. 

The Rural Center has a 14-year history of operating this program. In 1994, North Carolina was one of the first states outside 

of Michigan to adopt a CAP program. From 1994 to 2007, NC–CAP 

enrolled 1,850 loans totaling $103 million and creating or retaining 

more than 27,000 jobs. This was accomplished with an allocation 

of $3.6 million from state appropriations and other sources. 

Today, thanks to the Small Business Jobs Act, NC–CAP has been 

re-launched on a fundamentally larger scale. North Carolina will 

receive $46.1 million that will enable up to $800 million in small 

business lending to more than 10,000 businesses in our state. 

NC–CAP is a voluntary, loan-loss reserve portfolio insurance program. Eligible lending institutions, banks, CDFIs, and federally insured credit unions, elect whether to participate. The program allows a bank to mitigate the risk of its small business lending. For 

loans enrolled in the program, the borrower and/or the lender pays 

a fee of 2 to 7 percent. NC–CAP matches that amount, and the 

combined total is deposited in a loan loss reserve account at that 

lending institution. As more loans are enrolled, the reserve pool 

grows. In the event of a default on an NC–CAP loan, the lender 

may draw upon the reserve pool to cover the loss. Lenders are solely responsible for underwriting the loans and defining terms. Loans 

may be used to buy land, construct or renovate buildings, purchase 

equipment, or provide working capital. 

Why does North Carolina believe in this program? First, it is cost 

effective. For every $1 we invest, a lender will typically loan $20 

to small businesses. Second, it is non-bureaucratic. Paperwork is 

minimal, and the process is seamless for the borrower. Finally, it 

is proven. Not only do we draw upon our own experience, but more 

than 30 states have successfully operated CAP programs. 

Last December, North Carolina joined Michigan as the first two 

states to apply under the State Small Business Credit Initiative. In 
81 

February and early March, the Rural Center held 11 briefing sessions across North Carolina to roll out the program. These briefing 

sessions drew hundreds of participants, including banks, other 

lenders, technical assistance providers, and small business owners. 

Today, 26 lenders, including 23 banks, two CDFIs and one credit 

union have enrolled in NC–CAP. These 26 lenders represent 30 

percent of all branch bank locations in the state, giving the program statewide coverage. Another 15 lenders are in the process of 

signing up, and we continue to recruit others. Our staff has made 

face-to-face contact with each of North Carolina’s 130 banks, as 

well as our credit unions and CDFIs. 

North Carolina enrolled the first loan in the country using the 

federal allocation. At this early stage, we have 16 loans enrolled, 

including loans for restaurants, logging, and air cargo businesses. 

We anticipate a rapid escalation in enrollments, and in the next 

three weeks, we embark on a statewide publicity campaign. 

The leadership of several important partners is noteworthy. Senator Kay Hagan, who gave her support to this important legislation, our Governor who seized the opportunity afforded to our state 

by the State Small Business Credit Initiative, BB&T President and 

CEO Kelly King, who embraced and promoted the program to his 

fellow CEOs. 

As the former Chairman of our Board of Directors, Kelly was instrumental in bringing the CAP program to North Carolina originally. We also appreciate our partners at the North Carolina Department of Commerce and the SBTDC and in the State Small 

Business Credit Initiative Office at U.S. Treasury. They have been 

very responsive to our needs to helping ensure the success of our 

efforts. 

Our state has suffered severe losses from the recent recession. 

Now, as we begin to see signs of an improving economy, this new 

program is finding its legs. It could not be happening at a better 

time to stimulate the business and job growth we desperately need. 

Thank you. 

[The prepared statement of Mr. Woodie follows:] 
82 

Statement of 

Patrick Woodie, Vice President, Rural Development Programs 

The North Carolina Rural Economic Development Center, Inc. 

Before the 

Committee on Small Business and Entrepreneurship 

U.S. Senate 

May 19,2011 

Thank you, Chairman Landrieu, Ranking Member Snowe, and Members of the Committee for 

this opportunity to report on North Carolina's implementation of the North Carolina Capital 

Access Program, the statewide response to the opportunity afforded by the State Small Business 

Credit Initiative of the 2010 Small Business Jobs Act. 

I am Patrick Woodie, Vice President of Rural Development Programs for the North Carolina 

Rural Economic Development Center. For more than 20 years, our nonprofit organization has 

developed, promoted and implemented sound economic strategies to improve the quality oflife 

for rural North Carolinians. 

Typically, the Rural Center works in 85 of North Carolina's 100 counties. The North Carolina 

Capital Access Program is the exception. At the request of North Carolina's Governor, Beverly 

Perdue, the Rural Center is leading this statewide effort to spur new job creation and business 

investment. While the State Small Business Credit Initiative offers states the flexibility of using 

their allocation in numerous ways to boost small business lending, North Carolina has elected to 

invest its full allocation in the Capital Access Program, or NC-CAP. 

The Rural Center has a 14-year history of operating this program. In 1994, North Carolina was 

one of the first states outside of Michigan to adopt a CAP program. From 1994 to 2007, NCCAP enrolled 1,850 loans totaling $103 million and leading directly to the creation or retention 

of more than 27,000 jobs. This was accomplished with an allocation of$3.6 million from state 

appropriations and other sources. 

Today, thanks to the Small Business Jobs Act, NC-CAP has been re-launched on a 

fundamentally larger scale. North Carolina will receive $46.1 million that is expected to enable 

up to $800 million in small business lending to more than 10,000 businesses. 

NC-CAP is a voluntary, loan-loss reserve portfolio insurance program. Eligible lending 

institutions (which include banks, CDFIs and federally insured credit unions) elect whether to 

participate. The program allows a bank to mitigate the risk of its small business lending. For 

loans enrolled in the program, the borrower and/or the lender pays a fee of2 to 7 percent. NCCAP matches that amount, and the combined total is deposited into a loan loss reserve account at 

that lending institution. As more loans are enrolled, the reserve pool grows. In the event of a 

default on an NC-CAP loan, the lender may draw upon the reserve pool to cover the loss. 

Page 1 of2 
83 

Lenders are solely responsible for underwriting the loans and defining terms. Loans may be used 

to buy land, construct or renovate buildings, purchase equipment or provide working capital. 

Why does North Carolina believe in this program? First, it's cost effective. For every $1 we 

invest, a lender will typically make $20 in small business loans. Second, it's non-bureaucratic. 

Paperwork is minimal, and the process is seamless for the borrower. Finally, it's proven. Not 

only do we draw upon our own experience, but more than 30 states have successfully operated 

CAP programs. 

Last December, North Carolina joined Michigan as the first two states to apply under the State 

Small Business Credit Initiative. In January, both states executed contracts on the same day to 

draw down our respective allocations. In February and early March, the Rural Center held 11 

briefing sessions across North Carolina to roll out the program. These briefing sessions drew 

hundreds of participants, including banks, other lenders, technical assistance providers, and small 

business owners. 

Today, 26 lenders including 23 banks, 2 CDFIs and one credit union-- have enrolled in NCCAP. These 261enders represent 30 percent of all branch bank locations in the state. 95 of North 

Carolina's 100 counties have a lending institution currently offering the program. Another 15 

lenders are in the process of signing up, and we continue to recruit others. Our staff has made 

face-to-face contact with each of North Carolina's 130 banks, as well as our credit unions and 

CDFIs. 

North Carolina enrolled the first loan in the country using the federal allocation. At this early 

stage, we have 14 loans enrolled -going to businesses ranging from restaurants to logging to air 

cargo-- and we anticipate a rapid escalation in enrollments. In three weeks, we embark on a 

statewide publicity campaign. 

The leadership of several important partners is noteworthy: First, Senator Kay Hagan who 

knows our organization well and who gave her support to this important legislation; and 

secondly, our Governor who has seized upon the opportunity afforded by the State Small 

Business Credit Initiative. We are very appreciative of the efforts ofBB&T President and CEO 

Kelly King to embrace and promote the program to his fellow CEOs. As a former chairman of 

the Rural Center Board of Directors, Kelly was instrumental in bringing the CAP program to 

North Carolina in the first place. We also appreciate our partners in the State Small Business 

Credit Initiative Office of U.S. Treasury. They have been very responsive to our needs and 

concerns and to helping ensure the success of our efforts in North Carolina. 

Our state has suffered severe losses from the recent recession. Now, as we begin to see signs of 

an improving economy, this new program is finding its legs. It couldn't be happening at a better 

time to stimulate the business and job growth we desperately need. 

Page 2 of2 
84 

Chair LANDRIEU. Thank you so much. I am so excited to hear 

about your success in North Carolina, Mr. Woodie, and I know Senator Hagan was absolutely a leader in pushing us to establish this 

provision within our bill, and also Senator Levin was very instrumental having some experience in Michigan, of course. 

So, let me ask you this too again, for the record. What happened 

in North Carolina between 2007 and 2011? Did the program go 

away? 

Mr. WOODIE. The program did go away for a period of about four 

years. 

Chair LANDRIEU. And why despite its success? 

Mr. WOODIE. Despite its success, our primary funder had become 

the Golden Leaf Foundation, and the real reason it went away was, 

as it came time to raise a third round of capital for the program, 

their priority is investing in tobacco-dependent and economically 

distressed counties. 

About two-thirds of total loans had been made in the 15 urban 

counties in North Carolina, and just their priority as a funder did 

not meet their funding priorities. 

Therefore, much to the disappointment of several of the banks 

that participated, we shut down the program for a period of four 

years. 

We began looking early in 2010 as this opportunity looked like 

legislation was taking place that might include a provision like the 

State Small Business Credit Initiative, we started looking very 

early on at this as an opportunity to restart NC–CAP on a much 

larger scale. 

Scale was one of the issues with the earlier program. We had a 

very small amount of capital. Banks are very reluctant to, even 

though it is a great tool, it works very well for them, the ones that 

used it actually speak very highly of it; it is difficult to get banks 

to invest heavily in a program if they are not sure how long it is 

going to be around. 

And so that certainly was an obstacle with our early program. 

Chair LANDRIEU. So the authorization, if the staff will remind 

me, for our program is five years for this? Five years. So we hope 

that that will give you some stability for the start up on this, and 

we are really going to be looking at how this works because we are 

just desperate literally to find models that work for people like Mr. 

Blinderman, who could not do more in terms of what America expects of young people to do other than going to school, graduating 

at the top of their class, getting extraordinary degrees, yet when 

they go out to start business, there is no capital for them to start. 

And we wonder why we are having difficulty putting this recession in our rearview mirror. We are trying it all, all of the above, 

and I am excited about the program in North Carolina and potentially we could have a field hearing there at an appropriate time 

to really showcase what you all are doing and we are anxious to 

hear what Michigan is doing as well. 

Let me ask. Ms. Arslan, you testified that you are happy for the 

smallest businesses in America to be on a level playing field with 

the largest, and you realize the financial constraints that we are 

under. 
85 

What do we estimate it would cost to try to put these small businesses on an equal playing field? What are the most recent estimates? And do you have any suggestions about how we might step 

into that over time, for the record? 

Ms. ARSLAN. Again, I think this one-year tax provision was a 

good start. It will allow us to see the effectiveness of this deduction. 

Again, you know, it is up to the business owner to take full advantage of the deduction. I do think we would get better utilization 

if the IRS more effectively implemented the deduction, as mentioned putting that deduction on Schedule C where all other business expenses currently lie. 

But again, there are 22 million self-employed Americans that 

qualify for this particular tax benefit. Again in terms of qualifications, they simply have to be self-employed, a Schedule C filer, and 

they have to purchase their own health coverage. So anyone who 

meets the qualifications can take advantage of this. 

In terms of cost of this bill, we for years have promoted legislation to address this inequity permanently, and the bill has been 

scored at $2 to $21⁄2 billion a year over 10 years. 

Again, it is in complete correlation or relation to the number of 

self-employed people out there purchasing their own health care. 

So, the smaller the number of self-employed out there purchasing 

health coverage, the less people qualify for the deduction. The 

more, the more people qualify for the deduction which would address how much it costs. 

But again, at the end of the day, why is it okay for the smallest 

businesses out there to pay more into the tax, more in revenue, 

more in taxes than larger businesses? 

Why is it okay that a large business gets to deduct their health 

care costs, that workers of larger businesses get to pay for those 

health care costs with pretax dollars? 

But someone who is a one-person business, self-employed who 

needs the most assistance has to pay more in payroll taxes than 

anybody else. Again, it is just a fairness issue. In this economy, 

that money is even more important because every little bit counts. 

Chair LANDRIEU. Thank you. 

Finally, Mr. Blinderman, your story is exactly what we had 

hoped for when I myself and my colleagues passed the Small Business Bill. 

Could you restate for the record what you think your business 

in terms of its contribution to the local economy in terms of taxes 

that you are paying, employees. You mentioned something about 

suppliers. Would you state for the record the far reach of your successful small business? 

Mr. BLINDERMAN. Sure. I think to answer that question, it is best 

to understand the model of my existing restaurant. 

Currently, we have 35 employees and we generate over $3 million per year in gross revenue. Of that, it is fully taxable as income, 

as an LLC pass-through to all the owners and investors of the restaurant. 

In addition, all of our 35 employees are paid on the books. In the 

restaurant industry, people are aware that oftentimes tipped employees are paid out in cash each night. That does not happen at 

Mas Farmhouse. 
86 

Everyone receives the cash that comes in each night, or credit 

cards. It is deposited into the banks, funneled through our payroll 

company. Payroll taxes are deducted. Medicare, Medicaid, Social 

Security. 

Our payroll averages between $23- to 28,000 per week at Mas 

Farmhouse. Translating those numbers into Mas La Grillade, 

which will be a bigger restaurant and employ more people, our projected revenues conservatively, if we are able to meet our numbers, 

would generate anywhere from, again, $3.2 to $3.7, potentially 

more, million dollars in gross revenue which would be fully taxable 

by Federal, state and local authorities. 

In addition, our 65 employees, if you take the $23- to 28,000 per 

week we spend in payroll each and every week at Mas Farmhouse, 

you can effectively double that and perform the calculations to determine Social Security, Medicare, Medicaid, and other entitlements which will be deducted in addition to other taxes. 

I think most importantly, though, are the trickle-down effects for 

suppliers and vendors. Mas Farmhouse is built upon a model of 

sustainability and organic cuisine which, back in the day before it 

was a buzz work, has been open for seven years. 

That means we source all of our ingredients as much as possible 

within 150 miles of New York City. Farmers who would not otherwise be able to meet the New York restaurant market, growers, 

fisherman and others, people who we will spend $60 to 100 per 

week but which for them is a lot of money in revenue that we will 

consistently transfer over whether we are buying meat, poultry, 

fish or vegetables. 

In addition to our wine purveyors, in addition to all of the other 

vendors, from our glassware purveyors, our silverware purveyors, 

our cloth purveyors, our laundry needs, and all of the various other 

entities that go into servicing a full service fine dining restaurant. 

So, that is the benefits that I think one can expect, and those are 

the benefits that have already been achieved at Mas Farmhouse, 

which again was an SBA success story. 

Chair LANDRIEU. Thank you so much. 

I want to submit for the record—I think that would be an excellent way to close—your time has been very much appreciated— 

with a list of over 40 businesses. 

We literally could have filled this panel with hundreds of success 

stories of small businesses just like yours and programs statewide 

and regional programs that are stepping up to respond to the new 

provisions in this Act. 

So, I am going to submit it for the record just a list of 40 businesses that we know of that have benefitted. Eight jobs, 18 jobs, 

40 jobs, 10 jobs, and I could go through this list, hundreds of jobs 

created. 

[The documentation follows:] 
SolarFlex 

Technologies 

(William Snapp) 

GeoPak solutions 

(Todd raul) 

laserCraze 

(Gregory Hughes) 

QCare,. 

Watkinsville, GA 8jobs 

Hiliiard,OH 

Boston, MA 

Roswell, GA 

company was designing/buHding a system at Parris Island Recruiting 

installed on 14,000 square foot parking deck wili provide 50% of the power 

A $27,000 SBJA microloan was provided by SBA mico,lender Appalachian 

Community \oul of Cleveland, GA), The funds allowed the company to hire 8 new em

as electricians and installers, 

They provide "unit dosing" packaging for pharmaceutl

out and dose each of medicine; GenPa

new furniture, 

in GenPak expects to hire 18 new employees this year and u

the next S years depending on the volume, 

used a loan to ope

famliy entertainment center, in Woburn, MA, They 

and the made it Greg knew that in a rece

second location, Greg treated 37 Thanks to SIlJA, he saved $26,904,000 

a S8JA loan with 90% guarantee new office facHity. The owner call

when he found out would $10,000 

• This carpet and home dean company plans on hiring 10 new employees once they have expande
Four Winds 

Mechanical 

(Joseph Armijo) 

MBA Waste 

Services 

Seattle Safety 

(Brian Coughren 

& Tom Wittmen) 

New Mexico 

Atlanta, GA 

Seattle, WA 

5 jobs 

25 jobs 

5 jobs 

years, he retired from active duty and opened 

with his brothers in Albuquerque, NM. The firm - Four Winds Mechanical HTC/AC does plumb

work, heating/AC repair, and more. Four Winds has 12 employees. 

In 2009, Joseph's brothers wanted to sell the company. Joseph wanted to keep the company in 

so he used an SBA loan, backed by the Recovery Act, to purchase his brothers' interests in the 

loan had a 90% guarantee and saved Joseph over $5,000 in fees. He even had money left over f

capital. 

• A year later, Joseph went back to his bank to get additional finanCing. Because of his veteran sta

SBJA, he was able to save a couple thousand dollars on a Patriot Express loan. With the con

SBJA 504 loan, MBA Waste Services started work on a new recycling 

The new facility will be the first one in the area that can recycle co

• The owners are former Boeing engineers who started the company in 1996. It is a "deSign/ma

firm of large payload sled systems for dynamiC testing of automotive/aerospace seating an

systems" (i.e. crash dummy testing equipment]. 

• The company exports all over the world (Japan, S. Korea, Taiwan, UK, France, Italy, Canada and 

They knew SBJA could help jumpstart their international sales and expand into new markets. In 

had 27 employees, including 11 engineers. They got an SBA Working Capital loan then for $1 mi

credit to complete a $2 million export order to Porsche AG in Germany (which they paid-in-full). 

• SBJA increased SBA limit on Export Working Capital loans from $2 million to $5 million. The new l

the company complete three big export orders in China and other international markets - with m

way (known contracts valued at about $9 million). Their market share has grown to over 50% o

market. They have 40 employees and because of SBJA loan, they plan on creating 5 new jobs. 
Total 

Environmental 

Management 

(Curtis Scheetz, 

Sames) 

Once Upon a 

Child 

(Elaine Krieger) 

3 jobs 

Chicago, IL 

loan, a single faci!ity that provid

Because 

The borrower would not qualified for conventional real estate financing, the 

would not be without SSM 50410an/loao They hired 6 new employees an

able to keep their 29 existing employees on payroll. 

owner 

.. The new building wlil let her expand her openltioo1 bring more mOlley, :and hire,3 new employ

opened though that couldn't 

504 program to open another store - and anothe('".and 

More recently, got loan under SBJA to buy a building for ooe of her stores. Thanks t

has the capita! she needs to expand her business and jobs. saved her over $5,0

Today company owners 11 clothing resale stores (for children and adults). She has 165 emp

plans to expand. 
Carino's italian 

Grill 

(Robert Barany) 

Environmental 

Dynamk;,sl inc, 

(Charles Tharp & 

Randy Chan) 

Doral, 

Columbia, MO 

company 

contractors. 

growth needed caplta! for overseas 

$5 million Export Working loan, 

help with international This the first EWe? Joan for the customer and the 

have not made the loan without SBA's support, The company 

flexibility for Bonds 

bondlng issue has their for years}} 

collateralize 

now their wi!! significantly. 

by 30 percent due in part to the loan

owners own Honey Bee Bakers in lubbocKj TX and San Antonio, They 

business, so Charles got touch with the UT,San Antonio SBOC. Together, they worked on the

application for an 

Because 0' SIlJA, the loan carried a 90% guarantee. With it, they expanded the bakery and incr

workforce 10 29 people. 
Catania 

Hospitality Group 

AG Optical 

Systems 

(Dave Tandy) 

Firefly Farms 

(Michael Koch) 

Boston, MA 

Huntsville, AL 

MD 

in telescopes, Dave 

Corps, then to graduate school, and he put "did the corporate thing for awhile

got bored, 

as we!! as building things. So when a

in Huntsville, he got to buy CNC milchine needed to 

a few other pieces of equipment though, 

a Patriot 

wodd of domestic goat cheese individual national and 

international awards for excellence, Apparently 

They buy it from the Washington, DC Farmers' Market Currently have 

They received $650,000 SBJA 504 loan to renovate a building that they bought 2 yea

(but didn't the capital to renovate), This space will allow them to create a gourmet food and 

store/visitor center to showcase the art of cheese making, 
Baker Sales, Inc. 

(Robert eaker) 

Mas (La Grillade) 

(Eric Bllndermao) 

Slidell, LA 2 jobs 

62 jobs 

For 30 years, Baker Sales imported steel products and 

radius of Slidell, company has always wanted to 

American hou

President Robert Baker paid $800 for Commercial Service's Gold Key Service last March. He m

dozen potential clients in Panama days and developer he interested in orderin

$100,000 aluminum 

Thanks to the higher loan limits authorized by the Baker Sales Inc $3 million 7(a) 

wlll help them expand by facilitating export transactions with buyers in Panama. Th

olthe As 

as an practicing international 

loan, "Mas (Farmhouse)" [pronounced Mah) opened rave 

rose 

Budding upon his success, Eric wanted to open second restaurant "Mas (La GrHlade)." 

Eric got a 504 loan to purchase and renovate two-story building around the corner from 

restaurant. He saved $18,000 in fees because of SBJA. He also SBJA 7(a) loan to pay for star
93 

Chair LANDRIEU. But we are not going to rest on our laurels. We 

want to see what is working. What we can make work even better 

until this recession is in the rearview mirror. 

So thank you all very much. We really appreciate your advocacy 

on behalf of yourself and the organizations you represent. 

And this meeting is adjourned. Thank you. 

[Whereupon, at 11:48 a.m., the Committee was adjourned.] 

(95) 

APPENDIX MATERIAL SUBMITTED 
96 
97 

9. What is the most significant business issue that you are 

lac;n!! """"mly? 
98 
99 
100 

WORLO'S CHIEF EXEC\JT1VE ORnANIZATION 
101 
102 

What is the most significant business issue that you are 

facing currently? 
103 
104 

Which party will conlml the U.S. Senate in January? 
105 
106 
107 
108 

What is the most significant business' issue that you are 

facin9 currently? 
109 
110 

19. Do you consider !'resident Obama 10 be, 

better 

WORLD'S LEADING CHIEF 
111 

Secretarial: 
112 

Secretariat: 
113 

Æ 

Progress Report: SBA Requirements in the Small Business Jobs Act of 2010 

Prepared by: Alex Johnson, Brian van Hook 

BACKGROUND: 

Following months of debate, the Senate passed the Small Business Jobs Act of 2010 (Jobs Act) 

on September 16, 2010 by a vote of61-38. On September 27,2010, President Obama signed the 

bilI into law. The Jobs Act provided support to small businesses by: 1) providing $12 billion in 

immediate tax cuts for small fIrms; 2) increasing access to capital; and 3) strengthening the core 

programs of the Small Business Administration (SBA). In general, the legislation was intended 

to increase access to capital, encourage investment, promote entrepreneurship, and promote 

small business fairness. 

Title I of the Jobs Act includes all of the statutory requirements of the Small Business 

Administration (SBA). There are a total of 39 provisions in the Jobs Act that specifIcally and 

solely related to the SBA. These 39 provisions are subdivided into fIve categories: 

• Access to Credit 

• Trade and Exporting 

• Contracting 

• Management and Counseling Assistance 

• Disaster Loan Improvement 

STATUS OF IMPLEMENTATION: 

Of the 39 total SBA-specific provisions: 

• 28 provisions have been completed (72%) 

• 9 provisions are in the process of completion (23%) 

• 2 provisions are not completed (5%)